West London Economic Assessment A baseline analysis of the West London economy

Peter Brett Associates LLP Introduction

• PBA were commissioned in October 2015 to complete an economic assessment of West London to refresh the existing West London Vision for Growth inform strategic planning and prioritisation of interventions by the new West London Economic Prosperity Board. • The commission was approved by the West London Growth Directors’ Board and covers the economic sub–region made up of seven Boroughs. • The assessment is high level and does not cover all economic themes in Borough by Borough detail but seeks to inform an over arching sub-regional approach. • Other proposed and future studies will contain a more detailed deep dives into skills, employment and business on a Borough, Ward and super output area.

• The report is structured as follows: • Introduction and context Slides 3-8 • People & Skills Slides 9-27 • Enterprise Slides 28-45 • Place & Infrastructure Slides 46-68 • Inclusive Growth Slides 69-84 • Working to Catalyse Change Slides 85-95 • Issues to address Slides 96-98 • Selected Sources & Bibliography Slides 99-100

Peter Brett Associates LLP 2 Introduction

Peter Brett Associates LLP The purpose of this report

• This study provides a local economic assessment for West London. The question is “what do West London’s stakeholders need to know about current and likely future conditions to secure prosperity through the West London Vision for Growth” • This study provides • A look at macro trends, applied to West London • A spatial review of economic performance across the West London area, with a view on sub-area level performance • Key findings that will help inform the West London Economic Prosperity Board in delivering future policy, and targeting available resources where they are most likely to be effective • Proposed changes to Government structures in West London makes this work particularly important. Control over some central Government spending may be devolved to sub-regions. Without robust, granular data, the sub-region will be limited in its ability to plan and commission effectively. As City Growth Commission (2014, 12) states, “aligned service budgets and an integrated reform agenda hinge on the power of timely, accurate information”.

Peter Brett Associates LLP 4 Work so far: the West London Vision for Growth

• The West London Vision for Growth was developed in early 2014 and launched with the approval of West London Leaders in November 2014. • The Vision outlines six key objectives: • To achieve a step change in partnership with business and industry to facilitate sustainable economic growth • To increase small business start-up and survival rates through business support hubs, higher exports and focused collaboration with higher education institutions • To remove the skills gap and support low-paid residents in work to enable them to achieve pay levels that can sustain and improve their living arrangements • To radically improve success rates for employment programmes for residents with all young people in education, employment or training • To deliver at least 74,000 homes as part of a housing programme that meets the needs of our residents and supports growth • To create and maintain thriving town centres which are hubs for work and living • The West London Alliance states that the vision provides a good high level commitment to growth, but that a specific prioritisation of how to encourage inclusive growth in West London is needed • This assessment is the first stage in this process. It will be used to refresh the vision, which can be prioritised and translated into action planning.

Peter Brett Associates LLP 5 This assessment broadly follows the Government’s framework for increasing productivity, but with an additional focus on inclusive growth - so that all West London businesses and residents capture benefits

• A plan to grow productivity as a driver for economic growth has been the focus for the current and past governments. • ‘Productivity is the challenge of our time. It is what makes nations stronger, and families richer.’ (Treasury 2015: Fixing the Foundations) • The Treasury work sets key reforms to achieve a ‘step change’ towards creating a competitive economy • ‘encouraging long-term investment in economic capital, incl: infrastructure, skills & knowledge’ (Treasury 2015) • ‘promoting a dynamic economy that encourages innovation & helps resources flow to their most productive use’ (Treasury 2015) • Productivity relies on increasing three key factors: • People and skills –growing human capital • Enterprise – supporting what businesses do • Investment – in infrastructure and places • Our report follows this broad structure. We add a focus on inclusive growth to ensure that growth improves everyone’s living standards. • We begin with the context of change.

Peter Brett Associates LLP 6 The long term is driven by product and technological change, making future sources of success very hard to predict. Ideas of the future vary widely, so it seems centrally important to stay flexible and innovative

>Stiglitz: The first great depression was caused by a shift from farming

>Cowen: Innovation is slowing down. Economic growth will be low in future. There’s nothing much can be done

Perez: we are going through an frequently than ICT revolution. Revolutions cause thought crisis. We need the state to roll out ICT

>Arthur: Innovation is speeding up rapidly, as ICT gets adopted. Expect massive disruption. Technological unemployment will become widespread

Peter Brett Associates LLP 7 7 There are three broad risks to West London’s prosperity

• Risk 1: West London becomes a victim of its own success. It fails to invest in new growth capacity, and is overwhelmed as the external costs of growth (transport congestion; air quality; reduced social infrastructure quality; housing costs) gradually outweigh the locational benefits of being in London. As the city economy loses efficiency, capital investment moves out over time, and skilled labour follows. • Risk 2: West London fails to stay flexible and innovative, and becomes over-dependent on certain products or technologies. Professor James Simmie shows how some places have become ‘locked in’ to certain economic sectors, and so fail to adapt to emergent technologies and working patterns as they change over time. Simmie suggests that an ability to innovate is central to explanations of why some areas have been able to remain successful over time, whilst some areas have failed. • Risk 3: Inequalities and social exclusion in West London rise unacceptably. Social cohesion is a partial determinant of economic growth. A level of trust in other people is essential for economic success in large, dispersed and interdependent society. • In the worst case, each of the above risks could manifest themselves simultaneously in different economic sectors and parts of West London. West London could develop an approach which is intended to manage and reduce these risks in order to secure long-term prosperity. West London will need to invest in the capacity needed to cope with rapid growth; maximise the ability of the economy to adapt in the face of what is likely to be very rapid change, and create an environment in which new land uses and economic configurations are supported; and create a level of social inclusion which gives all members of society a shared stake in prosperity and growth.

Peter Brett Associates LLP 8 People and skills

Peter Brett Associates LLP What this section is about, and why it is important

• Skills are an important determinant of economic performance and growth. • Low skills are bad for individuals: educational attainment – in the form of qualifications and test scores – during compulsory schooling has been identified as “the most frequent and effective childhood predictor of adult outcomes”. (SEU 2004). Non-graduates, on average, earn around £200,000 less over a lifetime than non-graduates – even after taking degree costs into account. (BIS 2013). • Low skills are bad for West London as whole: There are wider network effects that mean that one person’s increase in skills increases the productive capacity of others. That means that the subject has a wider social and economic relevance, and is one of the justifications for Government intervention in the provision of skills. The skills of the workforce and technical expertise in a region are the most important drivers of knowledge-based industry business location choices. (DfT). And research has shown for example that a 1 percentage point increase in the number of people being trained adds 0.6% to productivity (Institute of Fiscal Studies, WP05/16). In OECD countries a 1% increase in the number of graduates adds 1.1% to GDP growth (BIS, Next steps for universities, business and Government, June 2012). • Demographic profiles matter to economic outcomes. Other things being equal, rising populations tend to bring rises in economic output, but the profile of the population has an important influence on income per head. This is because people’s economic behaviour and needs vary at different stages of life: while young people require investment in health and education, prime-age adults supply labour and savings, and the elderly require health care and retirement income (Prskawetz 2007)

Peter Brett Associates LLP 10 West London is a major entity in its own right. Its population of 2 million accounts for a quarter of London’s total population, and outnumbers that of Birmingham and Manchester together

Total Population, 2014 % share of London

North & East London 2,737,700 32%

South London 1,702,400 20%

Central London 2,078,100 24%

West London 2,020,500 24%

0% 10% 20% 30% 40% - 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Source: 2014 Mid year estimates Source: 2014 Mid year estimates

11 Peter Brett Associates LLP In West London, there are pockets of high population density – particularly in Hammersmith and Fulham – but for parts of West London, population density is relatively low Population density per square km (selected world cities) 35,000 • As Claire Bennie (2015) has shown, 30,000

25,000 • London is a relatively low density city. There 20,000 are just over 50 people and 20 homes per ha, or 5000 people per square kilometre – less than 15,000 one sixth of the density of Mumbai. 10,000 5,000 • The National Land Use Database (2012) shows that, at a London-wide level, London has 38% 0 open green space and (in addition) 24% back garden space. Buildings account for, at most, 22% of the land usage. Source: City Mayors Foundation (2007 data) Population density per square km (West London) • Population densities are higher along the eastern border of West London, particularly in LB Hammersmith & Fulham. Densities are lower along the west side, particularly in Hillingdon. Of course, these numbers will be influenced by the provision of employment land and major installations such as Heathrow.

• As we show later in the report, there are debates emerging about how population growth can be accommodated through increasing population densities, particularly in suburban areas and town centres. This data would tend to suggest that higher densities are possible, if the developments are made acceptable in planning terms.

12 Peter Brett Associates LLP Source: Census 2011 Overall, West London has more workers than jobs. It supplies other labour markets with people. But West London defies easy categorisation: it is not a dormitory. Looked at on a borough basis,

there are varying job densities Job Density England and Wales 0.83 Job Density (excl: City of London (81.79) and Westminster (4.35)) London 0.95 Lewisham 0.41 North & East London 0.61 Barking and Dagenham 0.44 South London 0.65 Waltham forest 0.45

Redbridge 0.45 Central London 1.73 Haringey 0.45 Newham 0.47 West London 0.79

Greenwich 0.48 - 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 Harrow 0.50 • The Office for National Statistics provides data on current population Croydon 0.53 Bexley 0.54 and jobs at local authority level. These provide a picture of workforce Enfield 0.57 jobs and the local labour force in West London. Broadly, there are Brent 0.58 three possible situations. Wandsworth 0.59 • Some areas will have as many jobs as workers; Havering 0.60 • Some will have more workers than jobs, and so ‘export’ workers to Sutton 0.61 Ealing 0.65 other areas. These areas can be said to have a low jobs density Bromley 0.65 (the number of jobs in an area divided by its working age Barnet 0.66 population). Hackney 0.67 • Others will have more jobs than workers, and ‘import’ workers from Merton 0.70 an economic hinterland. These areas have a high jobs density. Lambeth 0.72 • There is no clear West London story emerging from the data on jobs Kingston upon Thames 0.72 Richmond upon thames 0.76 densities. However, looking at the data at borough level shows England & Wales Average 0.80 significant differences. Harrow has a low jobs density compared to the London Average 0.93 rest of London, suggesting that many Harrow workers commute out of Hounslow 0.93 the area for employment. In contrast, Hillingdon has a high jobs Hammersmith and Fulham 1.08 density, suggesting that it imports labour. Ealing and Barnet sit mid- Hillingdon 1.13 Southwark 1.17 table when compared to the rest of London, further complicating the Kensington and Chelsea 1.29 story. This would suggest that there is no easy characterisation of the Tower Hamlets 1.34 West London area as a whole: it can neither be said to be a dormitory Islington 1.36 suburb, nor a jobs hotspot. Camden 2.15 0.00 Peter0.10 0.20 Brett0.30 0.40 Associates0.50 0.60 0.70 LLP0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.90 2.00 2.10 2.20 13 Source: ONS data (2013) No. of jobs / working age population At the moment, West London has a similar age profile to London as a whole, but has proportionately fewer old people than the rest of the UK. Two-thirds are working age (16-64 yrs), which is similar to other London sub-regions except Central London Population, 2014 0-15 yrs 16-25 yrs 26-64 yrs 65+ yrs • This data is taken from 2014 mid year population UK 19% 13% 51% 18% estimates, and so represents the best up to date view of the current population age structure in West London. London 20% 13% 55% 12%

• The data is potentially important because it may North & East London 22% 14% 54% 10% indicate a particular “dependent age” population, as against those of working age. South London 21% 11% 53% 15% • West London has a similar proportion of young Central London 18% 13% 59% 10% people (0-15 years) to the London average and the rest of the UK, but there is, at the moment, West London 21% 13% 54% 12% proportionally fewer 65+ people in West London compared to the UK, although the same as in Working Age Population, 2014 0% 20% 40% 60% 80% 100% London overall. UK 64% • At two-thirds of the population, the working age population (16 to 64 yrs), is also proportionally London 68% greater than in the UK. This is important because it mostly among this age group where North & East London 68% prosperity for all is generated: larger the proportion of working age people, then the lower the ‘dependency ratio’ - and the higher the South London 65% typical per capita output.

Central London 73%

West London 67%

Peter0% Brett10% Associates20% LLP30% 40% 50% 60% 70% 80% Source: 2014 Mid year estimates 14 Population and working age population has been rising strongly in West London. This is projected to continue • Relative to the UK, West London is projected to experience high rates of population Total Population and Working Age Population 2005- increases over the next 20 years. 2035 1.45 • The chart to the left is constructed from Experian data projections. These can be expected to differ on matters of detail from the projections used in the Outer London 1.35 Commission (OLC) Background Paper Issue 1 Options for Growth June 2015, but the

emerging story is similar.

1.25 = = 100 • The OLC states that “the 2011 Census showed that London’s population has been

2005 2005 increasing by an average of 87,000pa in the previous decade, which is nearly double the 1.15 rate of that had been assumed previously and planned for in the 2011 London Plan. Current population projections suggest London’s

population is likely to continue to grow and GrowthIndex: 1.05 West London (Total population) that between 2011 and 2036 it is projected to increase by a further 1.8 million, or 22 per Greater London (Total population) cent, putting it at 10 million by 2036.” The UK (Total population) report continued that “it is not anticipated that 0.95 West London (Working age population) London’s growth will be evenly distributed between age groups. The working age Greater London (Working age population) population (16 to 64) is projected to rise by 1 UK (Working age population) million or 18 per cent, while the over 65s are 0.85 expected to increase by 600,000 – an

increase of 65 per cent from 2011, driven by

2006 2017 2028 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2029 2030 2031 2032 2033 2034 2035 2005 increasing life expectancy and the large cohort of baby-boomers passing 65.” Peter Brett Associates LLP Source: Experian RPS 15 Population change has been modelled down to ward level

• These ward projections are taken from the GLA 2014 round population projections accessed via the London Datastore. London is shown first and then West London separately. GLA SHLAA-capped pop projections within London: short-term migration variant (2011-36) • The London wide map shows that population growth is strongest in East London. There is strong area-wide growth across West London, with pockets of particular change. These projections are frequently driven by residential expansions, including hotspots such as around Wembley, Golders Green and Colindale.

West GLA SHLAA-capped pop projections within West London: short-term migration variant (2011-36)

Source: GLA Demographics

Peter Brett Associates LLP Source: GLA Demographics 16 West London is very diverse

• The Census 2011 information on the left shows the number of people in West London Boroughs by ethnicity, showing how diverse West London is.

• Four out of the seven West London Boroughs have a majority non-white ethnic population and by 2021 this will have increased to five. 0 2 4 6 8% 10 12 14 16 WHITE • West London’s diversity and superb White Irish 2.9 global transport links mean that it 0.1 White Gypsy may be well positioned to benefit Other White 13.1 MIXED from a push to further Mixed White and Black Caribbean 1.1 internationalise its strong ‘small Mixed White and Black African 0.7 business’ economy. Any Mixed White and Asian 1.4 interventions would be hard to Other Mixed 1.3 design but could yield interesting ASIAN benefits. Such projects would need Indian 14.6 Pakistani 3.4 to be approached with caution to Bangladeshi 0.7 ensure that value to the public purse Chinese 1.4 is delivered (rather than simply Other Asian 7.9 benefiting private individuals). BLACK Black Caribbean 5.2 Black African 3.2 Other Black 1.8 OTHER Arab 2.1 Other ethnic group 2.4

WestPeter London Brett Boroughs Associates LLP England 17 Source: Census 2011 We now turn to skills. A skilled labour force is becoming increasingly important as the economy moves into higher value added goods and services, with a need for knowledge and creativity • Most new jobs are expected to be in knowledge sectors, and professional/managerial in nature. GLA April 2013 London Labour Market Projections predict that by 2036, there will be an additional 1.6 million jobs. Of that total, 55% of growth is expected to be in knowledge economy sectors; 1 million of the 1.6 million new jobs created will be in professional / managerial jobs. There is expected to be a decline in traditional sectors. (GLA 2013) • This is having important effects. Unskilled people will find that labour demand for their skills falls, eroding their wage bargaining power (OECD 2005). This has resulted in “a striking [negative] shift in the employment and earnings prospects of workers with low skills” (HM Treasury and DWP) • Skills levels will therefore be critical to the short, medium and long term performance of the West London economy. West London’s unskilled population will suffer constant pressure on wage rates (assuming all other things remain equal – e.g. minimum wage policy). An area’s economy which is locked into low wages will find itself compelled to compete on price and Source: GLA London Labour Market Projections 2013 geographical/physical endowments. The Area Based Review of the FE sector in London is being carried out which should provide a role for London’s sub-regional grouping of boroughs to deliver a reformed skills system that can help tackle these issues. Peter Brett Associates LLP 18 Qualifications of the working age residents in West London are relatively good, with nearly half holding a degree level qualification. But 15% have basic or no qualifications

Qualifications of working age residents, 2014 21% • Qualifications of the working age residents – whether England 36% Basic (NVQ 1) or no in work or not - in West London are relatively good 16% compared to England as a whole, with nearly half of London qualification 49% these residents holding a degree level qualification. Degree But 15% have basic or no qualifications. North & East London 20% 41% equivalent qualification 14% • The second chart shows the proportion of the South London 47% working-age residents with various qualification levels who are actually in work. It shows that more than half Central London 13% 62% of these working residents hold NVQ level 4+, which is greater than the proportion of all residents with 15% West London 48% NVQ4+ qualifications in the first chart.

0% 10% 20% 30% 40% 50% 60% • By contrast, only 11% of working-age residents in work hold a basic (NVQ L1) or no qualifications Qualifications of West London working age despite 15% of all working age residents achieving residents in work , 2014 this level. Other qualification 10% • These, albeit small, differences do infer that NVQ L4+ 56% qualifications make a difference in employment opportunities in West London. But while there are NVQ L3 14% differences between skills levels for all residents of West London compared with those residents in work, NVQ L2 9% in general they are not especially significant.

NVQ L1 6%

No qualification 5%

0%Peter Brett10% Associates20% LLP 30% 40% 50% 60% 19 % in employment (16-64) Source: Annual Population Survey Lower qualified residents are spatially concentrated. Because lower skilled workers are likely to struggle in the future economy, these areas will tend to perform worse over time. Resources may need to be concentrated in those areas in order to upskill workers through their working lives

Concentrations of low skilled residents - Concentrations of high skilled residents - where neighbourhoods where more than 13% have more than 18% have an NVQ L4 degree only a basic NVQ Level 1 or no qualification equivalent qualification (highest skilled 20% of (lowest skilled 20% of neighbourhoods) neighbourhoods)

Source: Census 2011 Source: Census 2011

20 Peter Brett Associates LLP Source: Census 2011 In an economy where skills demands are ever-rising, schools performance will be very important to the long term performance of the economy. Some areas of West London have shown strong improvement since 2002

Change in proportion of pupils eligible for FSM achieving five or more GCSEs at A*–C • London schools have improved significantly since 2000, at a including English and maths (or equivalent), faster rate than anywhere else in the country. across local authorities, 2002–12 • Some explanations suggest that improvements in KS4/GCSE results are best ascribed to changes in primary school attainment from year 2000 onwards (IFS/Institute for Education 2014). • Other research (Centre for London, CBFT 2014) suggests that four key school improvement interventions provided the impetus for improvement - London Challenge, Teach First, the academies programme and improved support from local authorities was responsible for the change, and identifies common features that link together all of these interventions: • a focus on performance data; • a culture of accountability; • the creation of a more professional working culture; • a collective sense of possibility and highly effective practitioner led professional development; and • effective leadership at every level of the system. • Data produced by the IFS study suggests that the increase in attainment in poorer pupils has been most significant in Hillingdon, Ealing, Hounslow, Hammersmith and Barnet.

Source: IFS (2014)

Peter Brett Associates LLP 21 Although performance has improved, GCSE outcomes remain spatially uneven. Schools’ performance has very significant long term economic implications

GCSE attainment • People entering the school system now will enter the labour market between 2033 and 2035, and leave the labour market around 2075.

• Fixing the performance of underperforming schools would represent a major long term economic development strategy in itself.

Source: DfES, OSCI

Peter Brett Associates LLP 22 Differences in school performance can be ascribed to the socio- economic background of pupils, but some schools are able to generate excellent results even with a disadvantaged school population. Best practice needs to be spread across the sub- region

• Social Mobility and Child Poverty Commission (2014) reported on the relationship between disadvantage and education provision: “Some schools seem to have learnt the secret of how to alleviate the impact of background on life chances. They have found a way of overcoming the barriers that impede social mobility. At a time when social mobility is stalling and child poverty is rising, there is an urgent need to share the lessons so that every school can crack that code.” • The key findings of the report were that 1. The wide variation in results between schools with similar intakes shows that there is a lot of scope to raise performance 2. Some schools will need to shift their focus towards core academic subjects and raising attainment across the whole ability range to avoid falling in national league tables and - most importantly - to improve social mobility for their pupils 3. Some teachers’ expectations of students from disadvantaged backgrounds are too low and getting the best teachers to teach in the worst schools requires stronger incentives, including higher pay 4. Schools could A) use the Pupil Premium strategically to improve social mobility B) build a high expectations, inclusive culture C) incessantly focus on the quality of teaching D) tailor strategies to engage parents E) prepare students for all aspects of life - not just for exams • This does happen in West London, as else where in London, but perhaps requires a consistent approach.

Peter Brett Associates LLP 23 Recent Bank of England research suggests that lower skilled jobs may be at risk of automation, putting further pressure on wages of lower skilled workers. This reinforces the need for the creation of a very effective lifelong learning capability for West London • Skills demands have been rising since the late 19th and early 20th centuries, as rising incomes created a demand for new goods and new, more complex and technical, ways of producing them (Haldane 2015). • Lower skilled jobs may be at risk from automation. It is argued that information technology may be poised for exponential growth, as its full fruits are harvested. Andy Haldane (Bank of England Chief Economist) suggests that we may be on the cusp of a fourth Industrial Revolution. Automation of administrative, clerical and production tasks may affect major swathes of the labour market. 15 million jobs may be at risk within the UK. Those most at risk from automation have the lowest pay: “technology could act as a regressive tax on the unskilled.” (Haldane 2015) • In previous periods of technological change, humans have responded by upskilling themselves, and rising real incomes have created new demands for human skills. But technological capacity is becoming so pervasive that this process may not occur in the same way in future. • If these trends do materialise – and we cannot be certain that they will - workers in higher skilled jobs will tend to be insulated from change, as well as those with in jobs that demand high levels of creativity, caring and emotional intelligence. • Residential areas with concentrations of lower skilled workers may be particularly affected by these shifts if large scale technological unemployment is created. This reinforces the need for the creation of a very effective lifelong learning capability for West London in order to help workers adapt to future circumstances as quickly as Peter Brett Associates LLP possible. 24

Skills upgrades outside school settings will also be critical

• The National Institute of Adult Continuing Education state that there is an lack of good quality studies “investigating the net impact of lifelong learning on poverty reduction in the UK and on the possible multiplier effect of educational policies with other initiatives”. Research finds that there “is a particularly strong need for continuing longitudinal studies” that demonstrate the impact of lifelong learning on candidates over time.

• However, there does seem to be an important role for lifelong learning. This might be particularly important for new migrants who arrive too old to pass through the school system. In an international study, the OECD has found that “in most countries, immigrants with a foreign-language background have significantly lower proficiency in literacy and numeracy than native- born adults. Countries with relatively large immigrant populations… need to consider more effective ways to support immigrants in learning the host language, through pre- and/or post-arrival interventions…Foreign-language immigrants who have low levels of education are particularly at risk. When low educational attainment is combined with poor proficiency in the language of the host country, integration into the labour market and society becomes even more difficult.” (OECD 2013)

Peter Brett Associates LLP 25 West London has a current and growing role in this area

• Firstly, the FE Sector is under review. There is a substantial role for London borough leaders working through London’s sub- regional grouping of boroughs to deliver a reformed skills system following the Area Based Review of the FE sector in London to shape future skills provision, with employers, via colleges.

• Secondly, London’s Mayor and Borough Leaders have been working closely together to agree the appropriate levels of governance and proposals for additional powers and funds sought for skills and employment as set out in London’s CSR submission on 4th September 2014.

• Thirdly, the wider West London Vision is to reduce the disparity between the high skills requirements of jobs available locally and the lower skill levels of many of the resident workforce. The Skills Escalator programme provides support for employed people with low skills to progress and increase their wages in order to end or reduce their dependence on benefits.

• Fourthly, a wider skills devolution is underway in London, particularly with regard to the transfer of adult learning budgets to local authorities.

• Finally, there is a prospect of long-term investment in infrastructure and housing in West London, which could be better related to social benefits. West London has already developed an approach to the Social Value Act 2012 (which came into force in January 2013). This has two elements. The first is that deprived people have the opportunity to obtain employment in growth areas, and secondly that SMEs have the opportunity of joining the supply chain for large public sector contracts.

Peter Brett Associates LLP 26 Key issues

• West London has a diverse and growing population. A rise in the working age population is expected, along with a significant rise in the number of older people. West London’s diversity and superb global transport links mean that it may be well positioned to benefit from a push to further internationalise its small business economy. Any interventions would be hard to design – and such projects would need to be approached with caution, if value to the public purse rather than private individuals was to be delivered - but could yield interesting benefits.

• The future prosperity of this population will depend to a significant extent on skills levels. Skills in West London are generally strong, but there 15% of people have basic or low levels of qualifications. These people will struggle in the economy of the future, and tend to be spatially concentrated. Resources may need to be mapped closely to these individuals and areas in order to address low skills. West London may have a role in this prioritisation and mapping process.

• School performance will be critical, and has long term economic implications. People entering the school system now will leave the labour market around 2075. Some schools are able to generate excellent results with a disadvantaged school population. London schools have made very significant strides in the last decade or so, but the practice of the very best still needs to be shared across the sub-region. West London may have a role in this process.

• Lifelong learning outside school settings will be critical. Ensuring that new migrants (who arrive too late to move through the school system) acquire language and job skills is very important to integration into the labour market and broader society. There may be upcoming challenges of automation particularly affecting lower skilled workers in London. This reinforces the need for the creation of a very effective lifelong learning capability for West London. It will also be important to capitalise on opportunities: there is a prospect of long-term investment in infrastructure and housing in West London, which could be better related to social benefits. West London has already developed an approach to the Social Value Act 2012 to ensured that public procurement processes create social benefits. West London has a significant – and growing – role in skills provision. The subject is going to be subject to detailed review. Getting lifelong learning and FE provision right is a potentially major win for West London, and is likely to have highly beneficial effects over the long term on both growth and social inclusion.

Peter Brett Associates LLP 27 Enterprise

Peter Brett Associates LLP What this section is about, and why it is important

• The engine of the West London economy is its businesses. Businesses create jobs and add value. Enterprises bring new ideas and technologies and increase competition. In this section, we explore the scale and key features of the West London’s businesses; their performance to date; and their expected performance in the future. • There is at times a basic confusion: that a bigger economy is necessarily better, or that more (of anything – jobs, workers, output) is necessarily better. • It is true that we get more economic output if we grow the number of workers, or if they work longer hours. But that is just growth through ‘brute force’: we have simply applied more resources. • Instead, what West London needs to do is grow output per worker. That can be termed ‘smart growth’ – or rising productivity. Output per worker can be raised by increasing skills, increasing capital, or better efficiency with which factors are combined – including technological improvement, ways of working and culture, management, economies of scale, regulation and competition. • Productivity is measured as output per hour, or worker, or person. Raising labour productivity is the most important way of generating long-term economic growth. The alternative - that of constantly raising the number of hours worked – is in the long term unsustainable.

Peter Brett Associates LLP 29 The degree of West London’s exposure to growing sectors is likely to influence future growth rates

GVA per employee (£000s) 2015 • We have looked at two economic models which broadly agree on 250 the future source of jobs growth.

200 ) • The Outer London Commission reports findings from the in-house GLA economic modelling. It finds that “the projections in the 2015 150 London Plan suggest that the total number of jobs in London could

employee (£000s employee increase from 4.9 million in 2011 to 5.8 million by 2036. The largest 100 increase in employment over the period to 2036 will be in the

GVA per per GVA professional, real estate, scientific & technical activities sectors – 50 nearly doubling to 1.1million. This is followed by growth in employment in administrative & support services, information & 0 Accomodation, Agriculture, Construction Finance & Information & Manufacturing Professional & Public Services Transport & Utilities Wholesale & Food Services & Forestry & Insurance communication Other Private storage Retail communication and accommodation & food services, which are Recreation Fishing Services West London (2015) West London (2035) UK (2015) UK (2035) expected to grow by a combined 536,000. In outer London, Projected change in employment by sector, West employment growth is expected to be 2.2 million in 2036 – the equivalent of 38.8% of the London total (and a 15.6% increase from London 2015-2035 the 2011 value), compared to inner London of 3.5 million jobs” Employment Growth, 2015 - 2035 (Outer London Commission (June 2015) Background Paper Issue 1 Total (148,050 jobs) 16% Options for Growth. Construction (11,510 jobs) 34% Accom, Food Serv & Recreation (22,190 jobs) 25% • Since the GLA job forecasts are not available below London level by Transport & storage (25,330 jobs) 24% sector, we have also drawn on the latest (Sept 2015) Experian Wholesale & Retail (24,250 jobs) 15% Regional Planning Local Economic Forecasts, which identifies that Public Serv (29,450 jobs) 15% West London will grow by 148,000 jobs (16%) over the next 20 Professional & Other Private Serv (29,360 jobs) 13%

Information & communication (8,380 jobs) 11% years. Unlike the London projections, the biggest increases are

Utilities (310 jobs) 7% projected in construction, accommodation & food services, and

Finance & Insurance (650 jobs) 6% transport & storage. More modest growth in jobs (but not

Manufacturing (-3,230 jobs) -8% necessarily output) is expected in the high value sectors of

Extraction & Mining (-120 jobs) -9% information and communication, professional services and financial

Agriculture, Forestry & Fishing (-30 jobs) -14% services, where many of the jobs are likely to be full time. The only

-15%-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% notably projected reduction is in manufacturing jobs, which

Source: Experian RPS continues its long term decline in West London and London, and Peter Brett Associates LLP even more widely across the nation. 30 West London is a big, prosperous economy. West London has the second highest total GVA of any London sub-region. West London has the highest productivity per worker, reflecting its more capital intensive economy

GVA (£m, 2015) GVA per worker, 2015

Central London £178,265 £66,396

North and East London £58,925 £50,441

South London £39,653 £55,436

West London £72,995 £67,319

£0 £50,000 £100,000 £150,000 £200,000 £0 £20,000 £40,000 £60,000 £80,000

Source: Experian RPS Source: Experian RPS

Peter Brett Associates LLP 31 Compared to the national average, West London has seen significant growth in total businesses – although is about London average on this measure No. of Enterprises, 2011 and 2015 • West London has nearly 100,000 business enterprises which are VAT 102,100 North & East London 2015 registered. Over five years, its business growth performance has been 69,500 2011 about the London average, which far exceeds the average growth for England and Wales. But West London’s performance is a way behind the 71,700 extraordinary performance of North and East London. South London 56,400 • North and East London’s performance in comparison to West London’s 173,500 requires some explanation. One potential explanation concerns the fact Central London 134,500 that, looking into the figures, North and East London contains the “flat white economy” hotspot of Old Street roundabout – the centre of the dense network of digital marketing, computer programming, software publishing 97,500 West London and video post-production businesses. Between 2012 and 2014, more 74,000 businesses were created in the single London postcode of EC1V Old Street postcode than in the whole of Manchester and Newcastle put together. In two years, 32,000 businesses have been registered in that Total net business growth 2011 - 2015 single postal district.

England & Wales 19% • The Flat White Economy is big. Across the UK, the media, information and London 33% communication sectors account for nearly 8% of GDP – the size of the car manufacturing and oil and gas industries combined. It is also growing North & East London 47% rapidly. Douglas McWilliams of CEBR believes that its share of GDP will double over the next decade. South London 27% • Some areas in West London already are strong performers in this sector – Central London 29% notably Hounslow, which has seen growth driven by Sky Digital. West London 32%

0% 20% 40% Source: ONS UK Business Counts Peter Brett Associates LLP 32 West London’s micro businesses are an important part of the economy – as they are in the rest of London. They may become the established large businesses of the future

Number of business Enterprises, by size (2015) • West London has a slightly Micro (1-9 emp) Small (10-49) Medium (50-249) Large (250+) higher proportion of micro West London 89,400 6,600 1,600 300 businesses (employing fewer Central London 151,700 17,300 4,600 1,100 than 10 workers) compared to the London & national South London 65,900 4,700 1,000 100 averages, although the North & East London 93,800 7,000 1,300 200 difference is not particularly significant. This proportion is Businesses by size (2015) particularly high in the 100% 0.3% 0.6% 0.2% 0.2% 0.4% 0.4% northern areas of West 1.4% 1.3% 1.6% 1.9% 2.0% 98% 2.6% London, in Barnet and Harrow. 96% 6.6% 6.8% • Such business can develop 6.7% 94% 7.9% into the large established 9.2% businesses of the future. But 92% 9.9% by the same token, micro- 90% businesses can be more vulnerable in times of change 88% and downturn because of lapses in cashflow rather 86% 91.4% 91.9% 91.7% 89.7% than being poor or bad 84% 88.5% 86.9% businesses.

82%

80% West London Central London South London North & East London London England & Wales Large (250+) 0.3% 0.6% 0.2% 0.2% 0.4% 0.4% Medium (50-249) 1.6% 2.6% 1.4% 1.3% 1.9% 2.0% Small (10-49) 6.7% 9.9% 6.6% 6.8% 7.9% 9.2% Micro (1-9 emp) 91.4% 86.9% 91.9% 91.7% 89.7% 88.5%

Peter Brett Associates LLP Source: ONS UK Business Counts 33 Micro businesses are particularly well represented in the local service economy and business services. Nationally, though, wages of the self employed have fallen by 22% since 2008/09

Micro businesses as a proportion of total in each location • Micro business are highly Barnet Brent Ealing Hamm. & Harrow Hillingdon Hounslow West London represented in the sectors Fulham London highlighted in red. This shows a fifth A : Agriculture, forestry & fishing 0% 0% 0% 0% 0% 0% 0% 0% 0% of ‘micro’ businesses are in the B : Mining & quarrying 0% 0% 0% 0% 0% 0% 0% 0% 0% “Professional, scientific & technical” C : Manufacturing 2% 3% 3% 3% 2% 3% 2% 3% 3% sector (compared to a quarter in D : Electricity, gas, steam & air conditioning supply 0% 0% 0% 0% 0% 0% 0% 0% 0% E : Water supply; sewerage, waste management & remediation 0% 0% 0% 0% 0% 0% 0% 0% 0% London). Comparatively, West F : Construction 12% 12% 13% 6% 12% 14% 9% 11% 9% London has a greater representation G : Wholesale & retail trade; repair of motor vehicles 14% 19% 17% 12% 16% 16% 14% 15% 13% of micro businesses in wholesale H : Transportation & storage 2% 3% 3% 1% 3% 6% 5% 3% 2% retail, construction & I.T. than I : Accommodation & food service activities 3% 5% 4% 4% 3% 4% 4% 4% 4% J : Information & communication 11% 13% 15% 15% 16% 14% 21% 15% 14% London, potentially more specific to K : Financial & insurance activities 2% 1% 1% 2% 2% 2% 1% 2% 3% serving a local and sub-regional L : Real estate activities 9% 5% 4% 4% 6% 4% 3% 5% 5% market. But also potentially M : Professional,Source: scientific ONS & UKtechnical Business activities Counts 22% 18% 20% 29% 23% 18% 20% 21% 25% N : Administrative & support service activities 9% 8% 8% 9% 7% 8% 8% 8% 10% representing the niche family owned O : Public administration & defence; compulsory social security 0% 0% 0% 0% 0% 0% 0% 0% 0% businesses which are prevalent in P : Education 1% 1% 1% 1% 1% 1% 1% 1% 1% certain high street areas. Q : Human health & social work activities 4% 4% 4% 4% 4% 4% 4% 4% 4% R : Arts, entertainment & recreation 3% 3% 3% 5% 2% 2% 3% 3% 4% • There has also been a strong shift S : Other service activities 4% 3% 4% 4% 3% 4% 4% 4% 4% towards self employment, and the T : Activities of households as employers 0% 0% 0% 0% 0% 0% 0% 0% 0% most common roles are working in U : Activities of extraterritorial organisations & bodies 0% 0% 0% 0% 0% 0% 0% 0% 0% construction and taxi driving and in Source: ONS UK Business Counts recent years there have been increases in management consultants. Part of this rise, though, might be what is known as ‘defensive self-employment’, and wages of the self employed have fallen by 22% since 2008/09 (ONS).

Peter Brett Associates LLP 34 Micro businesses are widely distributed across West London but with a denser scattering in the eastern side of the West London area - likely reflecting economic mass, transport provision and proximity to central London. However, a high proportion of micro-businesses are found in the northern part of West London

Source: BRES data 2015. Total employment (measured as employees plus working Peter Brett Associates LLP proprietors) working in businesses employment less than 10 employees and registered 35 for VAT and/or PAYE purposes . New start-ups drive innovation and competition, with consequent productivity effects. The latest data shows that West London has a good rate of new business formation

VAT registration (businesses) births and deaths, 2014 Businesses born Business Business Net Death and per 1,000 of births deaths change birth ratio resident pop West London 9.3 18,100 10,600 7,600 1.72 • The most recent data on VAT registrations, so that from 2014, West London’s business birth Central London 16.7 33,300 18,700 14,500 1.78 rate (as reflected by a new VAT registration) South London 7.2 11,900 7,000 4,900 1.70 per 1,000 population is higher than North and East, and South London. For every North & East London 8.3 21,500 11,200 10,300 1.91 business death (i.e. VAT de-registration) there are 1.72 additional business births in West London 10.4 84,800 47,500 37,200 1.78 London, which is much greater than the England & Wales 5.5 306,200 193,400 112,800 1.58 national rate, but below Central London and North & East London. 100% Business survival rates, 2009-2014 • Most small business in West London will fail 90% West London within 5 years, but despite this West London has a good record for business survival Central London 80% relative to Central London and North & East South London London. 70% North & East London

60% London England & Wales 50%

40%

30% 1 Year 2 Years 3 Years 4 Years 5 Years Source: Business Demography, 2014 Peter Brett Associates LLP 36 Business survival rates are perhaps less important than often thought in the creation of long term prosperity. It is the level of competition that creates productivity growth by driving innovation and efficiency

• Enterprise – the creation of new firms – raises productivity in a continually evolving process. This process was termed “creative destruction” by Schumpeter as far back as 1942. The mechanisms by which this process works are as follows. • Competition rises as new firms drive out existing underperforming firms, so levering up productivity. • New firms and entrepreneurs introduce new technology and innovation – again levering up productivity.

• There is an important and rather counter-intuitive element here. Research suggests that raising business survival rates is not as important as sometimes thought in raising economic growth. Instead, the birth rate may be more important. it is the constant process of competition and innovation between firms which drives long term productivity growth in an economy. Research suggests that “it is not necessary that new entities [ie, new firms] survive and exhibit strong growth in order for these supply side effects to occur…even those start-ups that fail to survive competition might make an important contribution. It is the contestability of the market that counts” (Fritsch and Mueller). Those firms destroyed in this process release labour capital and land for more productive use elsewhere in the economy.

• It is also the case that self employment has been a significant driver of business formation across the UK economy. A significant number of business “closures” will be self-employed people going back to paid employment – although it is not possible to isolate this precise process in the West London statistics.

• These findings may have implications for future decisions about the nature of future business support that West London may choose to commission.

Peter Brett Associates LLP 37 Because micro-businesses are such an important sector, there could be an interesting niche for West London in neighbourhood or town centre co-working spaces. These could be used to re-engineer high streets • Cass Business School research finds that ’future work’ will see more work being done remotely. These trends may lead to demand for a new types of space which is neither workplace nor home space but a new place to work. This has been termed “Third space” and use by telecommuters in US (growing at 10% p.a.) tends to focus on chain eateries and coffee houses. There is some evidence of an emerging trend in UK for independent cafes/coffee houses, libraries and more flexible atrium/flexible shared type spaces. • A number of reports highlight specific sectors which have a high or growing incidence of homeworking. The Workhub report (June 2010) – a survey of homeworkers in Milton Keynes and South Midlands revealed homeworkers in that area as being involved in the following sectors: • Legal, Finance, business, IT: solicitor’s practice, financial advice and planning, book-keeping, accountancy, training, coaching, management consultancies, and office support • Creative/marketing: architect, PR consultants, copywriting, graphic design, fine art, sculpture, jewellery, exhibition design, web design, consultancies, market research, photography, publishing) • Health: midwifery, personal training • Retail and personal services: food produce and sales, designing and manufacturing children’s products, accessories and gifts, florist, book sales, genealogy, educational goods and hardware, hair and beauty treatments, dog care/walking/boarding, personalised wine labelling, life coaching • Tourism: information and promotional goods. • With the growth of super-fast broadband, home working will become even more attractive. Not only it may provide an impetus for ICT sector growth, but it will also enable a much more comfortable use of internet telephony and video conferencing, thus contributing to a reduction in travel and commuting. With the profile of its resident population and access to central London markets, West London may be well placed to capitalise on these trends. • Chris Brown (Igloo): “London’s co-working spaces are currently booming. [But] starting up neighbourhood co-working spaces is incredibly challenging. You would be in pretty direct competition with coffee shops and it is hard to achieve the scale necessary to support onsite management in a local neighbourhood and so it is tough to find a workable business model.”

Peter Brett Associates LLP 38 38 Large businesses (employing more than 500 workers) are exclusively found in the south of West London Total employment in large businesses (employing more than 500 workers) in West London

West London (north) West London (south)

Peter Brett Associates LLP Source: BRES data 2012. Total employment (measured as employees plus working proprietors) working 39 in businesses employment less than 10 employees and registered for VAT and/or PAYE purposes We have looked at West London’s economy using Location Quotient analysis

• A more refined analysis of sectoral employment is useful at this point to help identify the West London’s areas of strengths and specialisation, and single out a number of sectors for more in-depth analysis. We do this in the following chart by combining Location Quotients (LQ), historical growth in jobs at national level over 2001-08, and job numbers by sub-sector.

• Location Quotients compare a sector’s share of total jobs in an area with the national average. This means that an LQ greater than 1 points to some degree of specialisation in the local economy. The higher the LQ, the stronger the specialisation.

• The following chart can easily be read in quadrants: • In the North East quadrant are sectors that are strongly represented in the local economy and have been growing nationally. They drive the local economy. • In the North West quadrant are sectors that have grown nationally but are poorly represented in the borough. They are sectors where some policy support may prove useful. • In the South West quadrant are sectors which have been declining and account for few jobs in the borough. These are sectors of little interest in terms of economic policy as they represent a small and shrinking number of jobs. • In the South East quadrant are sectors which have been declining but in which the local economy retains a significant presence. This is not a problem because West London has no significant jobs in these sectors.

• The size of the bubble is proportional to the size of the sector in terms of jobs.

• The key sectors in West London, which are well represented, large and have experienced recent growth at a national level, are Business Administration & Services, Financial & Insurance, Information & Communication, Transport & Storage and Wholesale.

Peter Brett Associates LLP 40 These changes have created an economy in which about one third of jobs are typically in white collar business and professional services. However, the single largest sector is in Transport and Storage (11%) reflecting West London’s gateway role between Central London, Heathrow and the rest of the country National employment growth, 2009-2014 25% Sectors over- Sectors under-represented Professional represented in WL, in WL, growing nationally scientific, 20% growing nationally, incl technical Transport & Storage 14 Business admin (9%) 13 15% and support (9%) 10 9 10% 12 2 17 Property (2%) Information and 165% Communication (8%) 6 18 Transport and 8 0% Wholesale (5%) 10 11 0.5 1 7 1.5 storage2 2.5 3 (including -5% postal) (11%) LQ : Eng & Wales = 1 = Wales & Eng : LQ 4 -10% Sectors under- Sectors over-represented represented in WL, 15 -15% in WL, shrinking nationally shrinking nationally -20% 1 : Agriculture, forestry & fishing (A) 2 : Mining, quarrying & utilities (B,D and E) 3 : Manufacturing (C) 4 : Construction (F) 5 : Motor trades (Part G) 6 : Wholesale (Part G) 7 : Retail (Part G) 8 : Transport & storage (inc postal) (H) 9 : Accommodation & food services (I) 10 : Information & communication (J) 11 : Financial & insurance (K) 12 : Property (L) 13 : Professional, scientific & technical (M) 14 : Business administration & support services (N) 15 : Public administration & defence (O) 16 : Education (P) 17 : Health (Q) 18 : Arts, entertainment, recreation & other services (R,S,T and U) 1 : Agriculture, forestry & fishing (A) 2 : Mining, quarrying & utilities (B,D and E) 3 : Manufacturing (C) 4 : Construction (F) 5 : Motor trades (Part G) 6 : Wholesale (Part G) 7 : Retail (Part G) 8 : Transport & storage (inc postal) (H) 9 : Accommodation & food services (I) 10 : Information & communication (J) 11 : Financial & insurance (K) 12 : Property (L) 13 : Professional, scientific & technical (M) 14 : Business administration & support services (N) 15 : Public administration & defence (O) 16 : Education (P) 17 : Health (Q) 18 : Arts, entertainment, recreation & other services (R,S,T and U)

Peter Brett Associates LLP Source: Business register and employment survey (2014) 41 West London’s employment in Knowledge Based Economy sectors is about average for London, but has been improving. Emerging work suggests that growth in offices may need flexible policy provision in some parts of West London Number and growth in KBE jobs • High value activities are part of the knowledge based economy, and as 2009 2014 Difference such are considered a key driver of productivity and economic growth, by West London 344,900 395,700 50,800 15% spreading technical progress and Central London 1,107,700 1,304,700 197,000 18% efficient business methods.

South London 240,900 245,800 4,900 2% • However, they do not always generate large numbers of North & East London 386,300 454,300 68,000 18% employment opportunities as rising productivity may translate into fewer jobs. Proportion of jobs in the knowledge based economy 60% • Emerging work we are aware of in (2009 compared to 2014) West London suggests that a flexible 2009 2014 50% approach to planning policy may be needed in order to accommodate growth in knowledge-based jobs. It 40% may be necessary to follow market signals in allowing these jobs to 30% locate in out-of-centre office parks, 55% 56% 49% rather than within town centres as 46% 46% 49% 20% 42% 43% 42% 41% 39% 40% stipulated by current policy.

10%

0% West London Central London South London North & East London England & London Wales 42 Peter Brett Associates LLP Source: Business register and employment survey (2014) Economic modelling is poor at picking up discontinuities. How exposed are West London’s enterprises and their employees to unexpected structural change? • Some economists suggest that the risks of significant discontinuities do not show up well in mainstream economic modelling. • Although economic modelling make an attempt to anticipate change, John Kay points out that modelling will tend to “project the present into the future with essentially linear trends…In the face of such radical uncertainty, the sensible course is to focus on known facts and give yourself as many options as possible, not to guess at numbers to fill the cells on your spreadsheet.” (John Kay, ex Director of IFS, Financial Times, November 2015) • Carl Benedikt Frey and Michael Osborne (2013) have a list of 700 jobs most at threat from structural changes brought by automation (see earlier slides on Transportation Haldane). • The sectors in which West London has particularly strong employment appear to be quite exposed to these changes. It is difficult to directly correlate Frey Office and admin and Osborne’s findings to West London because of the different sector categorisations used. But there does seem to be change coming. This area could usefully benefit from further detailed analysis, and we Sales and related suggest that GLA Economics considers this issue. • Of course, we cannot be sure how these changes will Services play out in practice. As Haldane points out, capital investment has historically created a real income rise which has led to new employment opportunities arising in other parts of the economy. • Given West London’s location between London and the rest of the UK, it may be very resilient in the future, and will remain well located for strategic transport Peter Brett Associates LLP connections abroad. 43 Further disruptive changes could be on the way. Is West London going to be sufficiently flexible to respond effectively? Any developing action plan needs to be agile enough to cope with rapid change • A recent review of the emerging research (Fox and O’Connor, 2015) found a number of emerging trends in the workplace . None are assured, and only some have implications for economic development. 1. Workplace structures. Rigid company structures will be replaced with a ‘corporate lattice’ that allows free-flowing career paths. These changes reinforce the importance of a flexible and well-skilled workforce, able to operate independently of traditional company structures – perhaps encouraging the creation of co-working spaces discussed earlier. 2. Artificial intelligence. As set out above, If forecasts on automation are correct, millions of jobs will be lost both nationally and globally. Again, this indicates the imperative of skills development and lifelong learning. 3. The human cloud. Websites that match employers with freelancers are growing fast – and so is the potential for lower wages and inequality. Benefits systems and workspace provision are likely to need to respond, and West London may have a role. 4. Workplace monitoring. Staff may be wearing activity trackers. (This is likely to be a privacy issue dealt with at national level, rather than at West London level). 5. The end of retirement and new forms of working. Retirement at 65 will become uncommon. Assumptions on economic modelling, housing and service planning may need to shift if new working patterns continue to emerge around home working and shared, short term workspaces. This could have implications for planning and land use in West London – again perhaps encouraging the creation of co-working spaces.

Peter Brett Associates LLP 44 Key issues

• West London is a big, prosperous economy. Economic modelling suggests that it will stay that way into the future. Compared to the national average, West London has seen significant growth in total businesses. West London’s micro businesses are an important part of the economy – as they are in the rest of London – and the micro-businesses are forming frequently. • New start-ups drive innovation and competition, with consequent productivity effects. The latest data shows that West London has a good rate of new business formation, and the most recent data – from 2013 – shows that West London’s business birth rate per 1,000 population is higher than South and North East London. Business survival rates are perhaps less important than often thought in the creation of long term prosperity. It is the level of competition that creates productivity growth by driving innovation and efficiency. These findings may have implications for future decisions about the prioritisation of spending, and the nature of any future business support that West London may choose to commission. • Because micro-businesses are such an important sector in West London, there could be an interesting niche for West London in neighbourhood or town centre co-working spaces. These could be used to re-engineer high streets uses in a time of structural economic change in the retail sector. West London may have a role in sponsoring these interventions. • A Location Quotient analysis shows that transport and storage, IT, wholesale, and business administration are strongly over- represented in the West London economy, and West London’s employment in Knowledge Based Economy sectors is about average for London, but has been improving. Emerging work we are aware of in West London suggests that West London authorities may need a flexible approach to planning policy in order to accommodate growth in knowledge- based jobs. It may be necessary to follow market signals in allowing these jobs to locate in out-of-centre office parks, rather than within town centres as stipulated by current policy. Policy change may be needed. • The degree of exposure that the West London economy has to growing sectors is likely to influence future growth rates, but we cannot be sure how the economy of the future will perform: economic modelling is poor at picking up discontinuities. Further disruptive changes could be on the way. Any developing action plan – and future land use planning - needs to emphasise the agility to cope with rapid changes in market conditions, and the importance of equipping lower skilled workers to cope with rapid global change.

Peter Brett Associates LLP 45

Places, housing and infrastructure

Peter Brett Associates LLP What this section is about, and why it is important

• Quality of place and quality of infrastructure is critical to future development. • For a while, this concept was contested. From around the mid-nineties, the idea emerged that the telecoms revolution and globalisation created a ‘flat earth’ in which place and geography was no longer important. Reich for example, has suggested that ‘almost every factor of production – money, technology, factories and equipment – moves effortlessly across borders’ creating a ‘death of distance’ and an ‘end of geography’. • Even at the time, though, some criticised this view as being over-simplified. Wolf pointed out that ‘a globalized economy could be defined as one in which neither distance nor national borders impede economic transactions. This would be a world where the costs of transport and communications were zero and the barriers created by differing national jurisdictions had vanished. Needless to say, we do not live in anything even close to such a world. And since many of the things we transport (including ourselves) are physical, we never will.’ • If anything, place specifics seem to becoming more important to economic development. London is an expensive place to live and do business, but the place-specific advantages of locating here more than outweigh the costs – so far. But it remains the case that in a globalising economy, aspects of Reich’s arguments have real traction. Flows of economic activity are accelerated and more footloose than ever. Consequently, competition for economic activity is rising, and it is important that West London embeds quality economic activity as deeply as possible in the economy. • London needs to create the conditions in which new investment can take place, and needs to create the infrastructure investment that will allow it to grow over the long term without overheating : West London needs to play a part in that economic place making and ensuring the best conditions for economic growth.

Peter Brett Associates LLP 47 The importance of embedding growth in local economies

• To embed growth, policy will need to create the right environment to embed globally footloose capital and workers. Although economies themselves do not directly compete, the authorities responsible for them do compete with their neighbours – and compete globally – for skilled residents and high value companies (Gordon, GEMACA). This has got to happen in an environment where flows of economic activity are accelerated and more footloose than ever. • Traditionally, economic productivity was determined by location (such as natural endowment and property offers), and technology and corporate strength; but since the 1980s/90s, telecoms mean that physical locational attributes matters less – and place-based social and cultural externalities matter more. • In this highly competitive environment, it is important that London embeds quality economic activity as deeply as possible in the local economy. The question, then, is how we best go about embedding economic activity. Successful areas will have the ability to provide locations and context for face-to-face contact, including a retail offer, places for social and cultural interaction (such as cafes, restaurants, theatres, sports facilities) and the ability to concentrate labour markets and expertise.

Peter Brett Associates LLP 48 West London needs a major expansion in the supply of housing, jobs space, and the infrastructure to support them

London Plan Housing Targets to 2025 for West London Minimum Annual • In London’s growth context, it will be essential to create 10 Year Monitoring growth capacity. This amounts to major supply-side measures Borough Target Target (2015 to release new site development opportunities for jobs and (2015- -2025) housing, and new social and transport infrastructure to serve 2025) new populations. Hillingdon 559 5593 Harrow 593 5927 • The London Plan and London Infrastructure Plan attempts to meet this challenge. The London Plan sets out a strong growth agenda. Barnet 2349 23489 London-wide, we need 49,000 and 62,000 new homes to be built Brent 1525 15253 every year, although those rates of development have only ever Ealing 1297 12972 been achieved for a short inter-war period, in a very different Hounslow 822 8222 regulatory environment. New infrastructure will be needed to H&F 1031 10312 support the new homes and jobs. The redevelopment of brownfield land could play a significant role in accommodating growth but has Total 8176 81768 other implications for economic growth. Major new housing and Source: GLA (2015, 110) Table 3.1 jobs developments are planned in London, focused around Annual housing completions 1871-2011 Opportunity Areas. There are 38 Opportunity Areas identified in the London Plan (FALP). Achieving the balance between creating housing and creating and maintaining jobs for people in current and proposed housing is one of London’s greatest challenges. • In West London, the minimum housing production target for the decade 2015 -25 is 82,000 homes. • The infrastructure pressures arising from population growth are acute. Looking at London Population rise to 2025 equates to growth of around 12 people per hour. At this rate, it will take less than 6 hours to fill a 70 seater bus.

Source: GLA (2014, 4) Table 3.1 Peter Brett Associates LLP 49 Housing demand plus relatively unresponsive supply translates into a major housing affordability problem. This creates significant social and economic problems

House price affordability ratio, 2014 Flats only 25 All properties average 20 23.8 15 19.4 17.0 14.6 16.2 14.5 14.1 10 12.2 10.9 9.9 10.7 9.4 8.1 5 7.0 0 LB Barnet LB Brent LB Ealing LB H&F LB Harrow LB Hillingdon LB Hounslow • GLA Economics (2015) cites London First evidence that “the implications of market distortions and knock-on effects can be serious, profoundly affecting the London economy and wellbeing of its residents. For businesses, the rising costs of housing in an area place upward pressure on wages as firms compensate their workers for higher housing costs and/or longer commutes. In turn, this may present an economic risk to London since it increases the costs of doing business, and reduces firms’ ability to recruit and retain staff in the capital”.

• House prices reduce productivity in an area – because if workers need paying more, then costs rise. (The productivity calculation is derived from output less cost). £2,500,000 Average House price (2014) £2,000,000 London Average (2014) £1,500,000 £1,000,000 £500,000

£0

Brent

Ealing

City City of…

Bexley

Sutton

Barnet

Enfield

Harrow

Merton

Camden

Bromley

Croydon

Hackney

Islington

Lambeth

Havering

Haringey

Newham

Lewisham

Hounslow

Hillingdon

Redbridge

Southwark

Greenwich

Barking and… Barking

Wandsworth

Hammersmith…

Kingston upon… Kingston Tower Hamlets Tower

Kensington and… Kensington 50 Waltham forest Waltham Peter Brett Associates LLP upon… Richmond Source: ASHE and Land Registry Only New York and Hong Kong have higher housing rents than London. There is substantial variation within London, but rents in north and west London tend to be higher than those in the south and east Median monthly private rents by London borough, 2013/14 • Research by GLA Economics (2015, 49) finds that fundamental drivers such as a growing population, attracted by London’s amenities and access to West London boroughs employment, and higher incomes and earnings are able to explain part of the rise in demand for housing in the capital. • The GLA Economics team finds that “the demand for housing has however also been fuelled by greater financial liberalisation and historically low costs of borrowing. The evidence shows that while earnings are increasingly disconnected from house prices, this affordability gap has to date been sustained by a combination of cheap, accessible mortgage credit and increasing transfers of wealth between friends and family to meet the costs of high deposit requirements. • Evidence on the changes in London’s housing supply in response to house price signals suggests that in the Source GLA Economics (2015) past, increases in the housing stock were more in line with the rates of growth in London’s population and Average monthly rents by selected major city, 2015 number of households and that these coincided with a period of more moderate house price increases. Since 1999, however, at a time of rapidly increasing house prices, housing supply has not kept pace with the demand for housing in London. In this respect, further measures to overcome constraints in housing supply Source GLA Economics (2015) / UBS 2015 can be seen as an important step to address affordability in London’s housing market.”

Peter Brett Associates LLP 51 Part of West London’s response to high rents and prices has been to shift employment land to housing, but West London is coming up against real land capacity constraints

• The GLA has worked with the Boroughs to estimate how much land has been lost over the last 5 years. From this we can estimate whether land is being released more quickly than anticipated and whether there is likely to be a growing shortage of industrial land. • The indications are that the loss of industrial land is happening very rapidly. We have sampled Ealing, Brent and Hammersmith and Fulham. The Mayor’s Land for Industry and Transport SPG, informed by the Industrial Benchmarks Study, indicated that the three boroughs should monitor the release of industrial land against a benchmark of 89 ha between 2011 and 2031. • From the new data collected by the boroughs we can see that over 60% of this land has already been lost in only 5 years – a rate of loss is more than double that suggested in the Benchmarks. • In summary, across the three boroughs it is likely that the supply of industrial land over the plan period will fall significantly short of the assessed minimum demand. For prime industrial locations within the area, the result is that demand for industrial land – the amount that would be taken up for industrial uses if made available to the market – exceeds physical capacity, as frustrated demand from the wider market focuses on the remaining land that is still reserved for industry. The market evidence confirms that view. • This situation is being replicated across the rest of Outer London. The Outer London Commission Report (Third Report) July 2014 highlighted that industrial land is being released in outer London at twice the annualised benchmark set out in the GLA’s Land for Industry and Transport SPG. • Demand for light industrial and logistics land demand in West London is now very strong, and there is no substantial amount of vacant industrial and logistics space remaining beyond the frictional minimum. The remaining industrial and logistics occupiers that are still in London tend to be connected to an essential supply chain or population-driven consumer need. (If they were not connected to this supply chain, then cost pressures would have pushed them out before now).

Peter Brett Associates LLP 52 Given that there is now very little obviously ‘surplus’ industrial land to move to housing, West London now faces hard questions about whether the costs of further industrial land loss outweigh the benefits of using the same space for housing

• There is no reliable ‘technical’ answer to the question. Because demand is so high, and supply is so tight, the typical method of advising on industrial land supply no longer works well in London. (This sets London apart from the rest of the UK: elsewhere, a reasonable technical answer to the question can be constructed from the use of jobs growth modelling and new site supply). • Instead, the only answer to this question becomes a question of judgement for land use planners. All that land use planners can do is to use industrial land evidence base work to better understand the broad implications of losing further industrial land, and set this against the broad implications of using the same space for housing. • Attempts have been made in policy to try to square this circle by trying to intensify the use of industrial and logistics land. This is not been especially successful. High bay warehouses are already in place, and this change has been successfully absorbed by the market. However, other attempts at intensification have met resistance from users. For example, a two storey distribution warehouse (which we believe to the be first and only example of its type in the UK) was built by SEGRO at the Heathrow PMA, just outside of Hounslow at Hatton Cross. The top floor of around 13,500 sq m has been difficult to let. Concerns by potential occupiers include drivers negotiating the access ramps and perceptions of risk of storing heavy goods on raised floors. Our work at Old Oak has suggested that occupiers prize open yardage, and as a result are unwilling to pay the additional costs resulting from this type of development, making this form of development unviable.

Peter Brett Associates LLP 53 There has also been a shift of office space to housing. The results appear to be mixed. Authorities may have to make the best of this new reality

• In 2013, new regulations allowed office space to be converted to residential use without planning permission – (‘Permitted Development rights’). The scope has recently been extended to also include the change of use of some smaller warehouse property to houses. The Government’s justification for this relaxation was that there was a national surplus of employment space, most noticeably secondary office space, which should be re-used to meet the national housing shortage. • There was some logic in this new approach. Changes to the way office space is utilised in recent years means that office buildings can be used much more intensively. While the UK economy has seen strong growth in the number of office jobs this growth has not kept up with improved office densities. So there was an undeniable national surplus of stock. In common with England most outer Boroughs had an acknowledged over supply of office space; this was a theme in the last GLA London Office Policy Review (2012). • But what is less certain is the effect on local economies and the individual London Boroughs. Few boroughs have commissioned extensive evidence to explore the extent to which office space had been lost, but in 2014 PBA worked with LB Richmond – near, but not within the West London area - and this evidence showed a dramatic shift: in some of the Borough centres almost all the office stock had been lost to housing within only 2 years. This may have been a relatively extreme example but a similar process will have been under way in West London overall. • It is difficult to know whether the process has been damaging overall. There may still be sufficient surplus office stock which can usefully be converted to residential without affecting the availability of employment space. The main corporate office developments seem unaffected – as yet. The alteration does seem to have affected the supply of secondary space which would have been affordable for small businesses and new businesses, but more positively may have brought new residential populations (and expenditure) to town centres. • The fact that the change in Permitted Development rights has now been made permanent suggests a long term process of office space loss which many ultimately result in the hollowing out of West London’s ability to host office employment. Any newly creates space will not be affected by PD rights for conversion, but new office development is unlikely given the viability differential between residential and office accommodation. • There is little West London authorities can do about this change. (Article 4 exemption applications have been made but these have been unsuccessful). Whether the shift is desirable or undesirable, authorities may therefore be best to see this change as part of the shift in town centre uses – and plan to make the best of this new reality.

Peter Brett Associates LLP 54 West London boroughs are responding to the need for inclusive economic growth by creating a pipeline of new Opportunity Areas, major development sites and infrastructure investments

• The picture is necessarily highly complex: West London is a large area, and this picture of delivery covers the long term.

• Much of the growth and infrastructure agenda is run through the Mayor and TfL.

• This structure of what is (in effect) regional planning appears to give London a real advantage over other parts of the UK, but there is likely to be a need to consider growth and investment priorities sub- regionally in order to lever in resources and create new models of delivery.

Peter Brett Associates LLP 55 West London’s Opportunity Areas offer space for 92,800 homes and 136,000 new jobs in West London. They use transport investment to open up major opportunities for new investment Opportunity Areas and Areas for Intensification in the London Plan (2015) • Opportunity Areas are the focus of attempts to raise the ability of London to house a rapidly growing population and create commercial space for jobs. The London Plan has 38 Opportunity Areas. Across London as a whole, London First (2015) calculate that 23% of new housing capacity identified by the boroughs being in the Areas. The Areas vary in physical size and growth potential, but typically each can accommodate at least 5,000 jobs, 2,500 new homes, or some combination of the two. These are not just large sites: they are large sites that are also linked to existing or potential improvements to transport accessibility. • Opportunity Areas within the West London boundary are at Source GLA (2015) Heathrow (Hillingdon), Southall (Ealing), Harrow and Wealdstone (Harrow) Wembley (Brent) Colindale/Burnt Oak Opportunity Areas and Intensification Areas in West (majority Barnet) Cricklewood Brent Cross (Barnet) Old Oak London (homes and jobs) to 2036 and Park Royal (Brent, Ealing and Hammersmith & Fulham), White City (Hammersmith & Fulham) and Earls Court (H&F Employment Minimum new with RBK&C) Place / status Borough capacity homes Opportunity Area • Opportunity Areas are emerging at Kingston and Hounslow Heathrow Hillingdon 12,000 9,000 (GLA, 2015). Southall Ealing 3,000 6,000 Harrow and Wealdstone Harrow 3,000 2,800 • Together, the West London Opportunity Areas have the Wembley Brent 11,000 11,500 capacity to deliver 136,000 new jobs and 92,800 extra homes. Colindale/Burnt Oak Barnet 2,000 12,500 Opportunity Areas typically require significant upfront transport Cricklewood Brent Cross Barnet 20,000 10,000 Old Oak Common Brent, Ealing, H&F 55,000 24,000 investment to unlock their development potential, alongside Park Royal Brent, Ealing, H&F 10,000 1,500 social infrastructure to support new communities. White City H&F 10,000 6,000 Earls Court & W Kensington H&F with RBK&C 9,500 7,500 • There is one intensification area at Mill Hill East (Barnet) Intensification Area • Major growth is also planned in West London outside the Mill Hill East Barnet 500 2,000 Total 136,000 92,800 Opportunity Areas. Source GLA London Plan (2015) Annex 1 NB. Old Oak and Park Royal have been merged to form the Old Oak & Park Royal Development Corporation Peter Brett Associates LLP 56

West London boroughs could continue to push hard on production of Opportunity Area Planning Frameworks and Development Infrastructure Funding Studies

• The delivery of Opportunity Areas may require land assembly, land remediation, and/or assistance with the relocation of some of the existing uses, particularly industrial activities. Each London Opportunity Area is supported with a rolling programme of further support which intends to de-risk investment driving out information and building a shared understanding of delivery between public and private sectors. • The GLA envisages that an Opportunity Area Planning Study (OAPF) is prepared for each Opportunity Area, which is then followed by a DIFS (Development Infrastructure Funding Study). • OAPFs (and subsequent DIFS) studies production has a way to go before full coverage is reached in West London. OAPFs have been published or are in draft at Southall (2014), Cricklewood/Brent Cross (2008), White City (2014) and Old Oak and Park Royal (2015) and Earls Court and West Kensington (2012). Half of Opportunity Areas remain without an OAPF. • It may be advantageous to increase in the speed and scale of production of OAPFs and DIFS studies. We understand that the GLA is reviewing this issue, and the GLA and boroughs are likely to need to work together very closely in future.

Peter Brett Associates LLP 57 If West London is running up against the limits of its ability to create new residential space from ex-employment and office sites, how might it respond? Options are being explored

Option 1: Trend base

• West London may need to work creatively with the new development options which are being developed.

• As the Outer London Commission reports (June 2015) Report Background Paper Issue 1 Options for Growth a number of spatial growth scenarios are being worked up for consideration in the next London Plan. These are based on 2050 London Infrastructure Plan.

Source: TfL, Outer London Commission • We set these out below Option 2: Density increase at PTAL 4+ • Option 1: Trend base shares growth relatively evenly between inner and outer London. • Option 2 looks at increasing housing densities in locations with a PTAL over 4, taking account of funded and committed transport schemes. Additional work assumes that Crossrail 2 and Bakerloo Line extension are funded. This finds room for 150,000 people up to 2050.

Peter Brett Associates LLP Source: TfL, Outer London Commission 58 West London could begin to investigate Options 2, 3 and 4 further? Which town centres and suburbs are suitable for higher density, housing led renewal or redevelopment? Which transport nodes should see further intensification? Option 3: increasing densities in district and major centres • Option 3 looks at increasing densities in all district and major centres. The scenario shows that inner London population would grow by 11% and outer London by 16%, reflecting the higher number of town centres in outer London than inner London. This scenario would be likely to have a significant impact in West London.

• Option 4 looks at increasing residential densities. Work by HTA suggests that if 10% of semi-detaching housing was redeveloped at twice the existing density this would accommodate a total of 400,000 new homes. This scenario therefore looks at housing built between1930 and 1939, which includes mainly semi-detached housing which are built at less than 30 dwellings per hectare – Option 4: suburban renewal Source: TfL, Outer London Commission typical of West London. This scenario presents an interesting alternative distribution to the other scenarios, with a distinct bias towards population growth in outer London. Under this scenario, the 2050 Infrastructure Plan particularly emphasizes the importance of ensuring that employment growth would also need to be promoted in these areas to ensure that by intensifying these parts of outer London would not move them to a dormitory role.

• Option 5 – not shown here – looks at the possibility of growing capacity in the wider south east (including Garden Cities and limited use of green belt).

Peter Brett Associates LLP Source: TfL, Outer London Commission 59 West London might be able to adopt an accommodating policy approach to ways of making suburban housing denser?

• Policy will need to be flexible enough to allow rapid adaptation to Maccreanor Lavington proposals for denser suburbs economic change. In a rapidly changing and uncertain economic environment, an ability to change rapidly is essential. London has shown that flexibility, and Outer London has that flexibility too: LSE research states that ‘Outer London is a success story and that could provide lessons on successful adaptation to change. This success is often based on ‘invisible’ spaces, such as garages and backlands and ‘invisible’ uses such as small business, workshops and offices. Much of outer London is successful because it is flexible and adaptable; this applies to both its fabric and its communities. Often unremarkable, the built form has shown an ability to be adapted over time to new uses and changing economic circumstances’. • There is likely to need to be a mix of initiatives, such as • A prompt response to the findings of the London Land Commission on releasing public sector land supply. • A creative, positive approach to new ways of doing things – for Baca proposals for new housing on water example, around new proposals for increasing density in low density suburbs arising from New London Architecture recent work on New Ideas for Housing. Maccreanor Lavington suggests that with over 600,000 semi-detached homes in London, the suburbs could be where the focus should lie. The practice’s ‘multi-detached’ idea seeks to intensify the suburbs on a plot-by-plot basis. If five per cent of the semis in outer London could be replaced with four-storey detached mansion blocks, some 81,000 new ‘Multi-detached’ homes could be created, facilitated by Local Development Orders. • The ageing population identified earlier may need to be supported with more older peoples accommodation. These “last time purchasers” can release large amounts of family housing, helping to alleviate shortages, and can create new town centre populations. There are 5.3 million under occupied homes in the UK with 7.7 million spare bedrooms. (Legal and General, 2015). • Specialist student accommodation creates new town centre populations and can reduce loads on the rental sector. Peter Brett Associates LLP 60 West London might be able to find housing and jobs expansion space through a sensitive and careful green belt review?

• Green belt review – and subsequently focusing green belt on areas of real value – might release valuable development land. • The Government is facilitating such an approach, with a consultation on a NPPF change which will allow councils “to allocate appropriate small-scale sites in the Green Belt specifically for starter homes”. (Dec 2015)

Peter Brett Associates LLP 61

West London might be able to find housing and jobs expansion space from a flexible approach to town centre uses? • Town centres are undergoing major changes, and an expanded role for town centre residential uses may be an important new role. Research suggests that retail performance will continue to polarise, with secondary shopping venues declining further while prime venues will thrive. This 'polarisation trend' is a significant and long-term trend which has been taking place in UK retail in recent years, and is expected to continue in the short to medium term. There are two drivers. First is the preference of retailers to concentrate trading activities in larger schemes in larger centres. Second is customers themselves, who have become more discerning and are increasingly prepared to travel further afield. • There is therefore a concentration of comparison goods expenditure in a smaller number of larger centres. This concentration of retailing activity is likely to threaten medium and smaller centres, and require them to potentially refocus their role and function away from solely being retail destinations. • The convenience (food) sector is restructuring. The proportion of convenience floorspace accounted for by ‘smaller stores’ will increase. Convenience goods market growth forecast at 29% between 2012 and 2017, from £33.9bn to £43.6bn (IDG 2014). • The share of internet sales as a proportion of total retail sales is growing. This increased to 11.7% in mid-2015 against 4.7% in June 2008 (Experian 2015). Non-store spending will account for 17.8% of total retail spending in 2020 rising to 19.6% by the mid-2030s driven by multi-channel internet sales. Savills forecast that 20-25% of retail sales will be generated online across Europe by 2025 (Savills 2015). • The private leisure sector is forecast to grow. This sector includes restaurants, cinemas, and non-municipal health and fitness facilities. This sector is forecast to account for an increasing amount of town centre floorspace. Strong demand for floorspace into 2016, particularly in London (Savills 2015). • Together, these threats suggest that West London needs to be thinking ahead of how to position its town centres to weather this shift. One commentator suggests that we ‘begin by thinking of the high street as the social heart of a town or suburb, not just the commercial heart. We need to reclaim town centres for community activity, learning, leisure and living. Viable retail and economic uses can then cluster around activities that people want to engage in, and in places they want to go to’. • Various independent studies have made a series of common recommendations for town centres. A new role for housing is likely to be an important part of the mix. • Some West London town centres may require significant repositioning, redevelopment and masterplanning in order to keep up with changes in the retail market. A diversified range of town centre uses will be required, to include leisure, housing, employment and community uses. • Flexible set-down space could be integrated with residential uses. • Strong Local Authority leadership is required to develop a clear town centre vision and strategy. Peter Brett Associates LLP 62 62

West London is already exploring how space for housing and jobs might arise from new thinking on the public sector estate through the One Public Estate model

• In 2014, the West London Alliance commissioned a review of public sector property to develop an understanding of the scale and potential of the public sector property portfolio in West London (Barnet, Brent. Ealing, Harrow, Hammersmith & Fulham and Hounslow) and its capacity to deliver more housing. The work included: • developing a database of public assets as the foundation to developing increased joint work around the use of assets • Modelling four “exemplar” sites to demonstrate what a different approach might achieve • The findings of the review included: • Development of a new co-operative approach to public sector assets is an achievable goal with tangible benefits both financial and operational; • Better use of assets would deliver more housing, more affordable housing, new public sector services and a financial return; • The identification of 600 non local authority public assets and somewhere between 2,000 -4,000 local authority properties/assets in the 6 borough areas (excluding council housing); • Taken collectively, the four exemplar sites showed, among other things: • that, in addition to new homes, a number of brand new buildings for delivering public services could be created without any external subsidy; • the potential to release funds to the public sector; • that intensification of sites is achievable and financially attractive; • public sector assets are often co-located and can be combined to achieve greater outcomes than developing them on their own; and • that the financial returns are greater if the public sector takes on a more active development role. • Next Steps • Having identified the potential, next steps include working with partners to develop more collaborative approaches and practical solutions to any barriers within the context of the urgency to resolve West London's housing pressures.

Peter Brett Associates LLP 63 Over time, improvements in IT could help West London grow the economy without major increases in the demand for space

• Information technologies appear to have People working mainly at or from home begun to alter the way in which space is occupied – although the LSE finds that there is surprisingly little evaluation work carried out on this issues (What Works Centre, 2015). The London Office Policy Review found that utilisation rates are increasing (meaning that there are now frequently fewer desks than workers, as some workers are assumed to be working at home or otherwise out of the office). The result is what is known as “spaceless growth”; organisations can grow without a corresponding increase in the amount of office space they use. This reduces the amount of office space demanded.

• This changing situation is reflected in Government planning guidance. The HCA provided updated guidance on employment densities in 2010. These newer densities reflect modern working practices; for example flat screen monitors, home working facilities by broadband and modern manufacturing. Appendix 2 of the HCA guide compares the 2001 edition to the 2010 edition. For most office uses space is used at least 60% more intensively; the density for 'general office' space has fallen from 1 FTE Job for each 19 sqm of floorspace to 1:12 sqm. For 'business parks' the density is now estimated as 1:10, very roughly half the space assumed per worker in typical previous studies. Peter Brett Associates LLP 64 High speed broadband is widely available in West London, but some areas – notably Park Royal – complain of slow speeds

Average broadband speed (2015) Superfast (greater than 24 Mbps) broadband availability

Source: House of Commons Library (2015) Fixed Broadband: Policy and Speeds Source: House of Commons Library (2015) Fixed Broadband: Policy and Speeds • New homes will be provided with high speed connections as part of the normal operation of the market. BT Openreach will normally require developers to excavate and lay the necessary ducts and joint boxes, which BT Openreach provide free of charge, and construct the necessary chambers as part of the general highway construction works. All other works are typically undertaken by BT Openreach at their expense, provided each individual connection does not exceed £3,400. For residential developments in dense urban areas, it is unlikely that this cost will be exceeded. • Businesses in most areas are able to buy high quality internet connections from commercial providers. New infrastructure providers are emerging as competitors to BT Openreach, such as Hyperoptic. However, some businesses are not willing or able to pay for custom connections. And in some areas in West London – notably Park Royal Industrial Estate (the largest industrial site in Europe) – we understand that businesses complain of low speeds. Elements of this issue are being addressed: in 2011 the government set up the Urban Broadband Fund (UBF). A voucher scheme contributes £3000 towards the cost of broadband connections for business. London businesses have claimed the largest number of vouchers (House of Commons, 2015, 14). • BT runs a number of exemplar projects across the UK, and could be encouraged to see parts of West London as a testbed for new G-Fast technology, which offers 80-500mbps speeds. These speeds are far beyond those available even to Ethernet users. If G-Fast is not available, developers could be encouraged to install Ethernet connections to individual blocks of flats. This would provide very high speed access both on upload and download. Peter Brett Associates LLP 65 A closer look at average broadband speeds in West London shows generally effective provision but pockets of under performance. The economic effects of underperformance are likely to vary by how people and firms adapt to and innovate around technology Average broadband speed (2015) • This map provides less context than the preceding map, but gives a clearer view of conditions in West London. It suggests that areas receiving superfast broadband (classed as faster than 24 mb/s) are relatively widespread in West London, but that there are pockets of underperformance. • Overall, of the 16 broadband evaluations that the LSE’s What Works Centre reviewed, 14 found that broadband has positive impacts on the local economy. However, effects are likely to vary across types of firms, workers and areas, and may not be large in the aggregate. The LSE reports that • enthusiasts for broadband provision suggest that the technologies may allow for efficiencies in production, both by lowering costs (eg working with suppliers) and by enabling innovation (eg reaching new customers online). Productivity gains could translate into higher wages and possibly higher levels of employment (although firms might well shed staff in response to technological change), and allow for more flexible patterns of work, and lower the barriers to starting a business. • Sceptics suggest that the economic implications of broadband are overstated. • There is a middle camp between these groups, which assumes that the internet and ICTs contribute to economic change, but that the extent of this change depends on how people and firms adapt to and innovate around technology. • We suggest that if West London is to get involved in Source: House of Commons Library (2015) funding or influencing superfast broadband provision, it Fixed Broadband: Policy and Speeds will need a carefully thought through programme which provides a clear set of benefits which would not be delivered anyway through market provision. Peter Brett Associates LLP 66 Great living environments will have positive economic impacts

• Fuelled by labour mobility and increasing personal wealth, many households will have a growing choice as to where they live. Richard Florida: “Quality of place – particularly natural, recreational, and lifestyle amenities – is absolutely vital in attracting knowledge workers and in supporting leading-edge high technology firms and industries. Knowledge workers balance economic opportunity and lifestyle in selecting a place to live and work. Given that they have a wealth of job opportunities, knowledge workers have the ability to choose cities and regions that are attractive places to live as well as work”. • There is good evidence that investment follows concentrations of skilled workers: attract and retain skilled workers, and firms will come to take advantage of them. • Clearly, strong environments create benefits for all members of society and represent a merit good and a public good – justifying continued provision.

Peter Brett Associates LLP 67 Key issues

• London needs to create the conditions in which new investment can take place, and needs to create the infrastructure investment that will allow it to grow over the long term without overheating. • Strong housing demand plus relatively unresponsive housing supply translates into a major housing affordability problem. However, West London is coming up against real land capacity constraints. • Part of West London’s response to high rents and prices has been to shift employment land to housing. There have been attempts to densify development on industrial land, and so release more land for housing use. However, there appear to be limits to occupiers’ willingness and ability to use employment land more intensively. Changes to PD rights have meant that there has also been a shift of office space to housing use – with a mixture of positive and negative effects. Authorities may have to make the best of this new reality. • West London boroughs are responding to the need for inclusive economic growth by creating a pipeline of new Opportunity Areas, major development sites and infrastructure investments. London’s Opportunity Areas offer space for 92,800 homes and 136,000 new jobs in West London. They use transport investment to open up major opportunities for new investment. West London boroughs could continue to push hard on production of Opportunity Area Planning Frameworks and Development Infrastructure Funding Studies. • West London boroughs will be well aware that Opportunity Areas are by no means the full solution to the demands of growth. Emerging development options see new approaches being considered. Hard choices may be needed – perhaps allied with a relatively permissive planning framework that allows innovation and the risks that inevitably accompany it. New ideas on denser development in existing suburban areas could be trialled, and selective redevelopment at places with good transport connections encouraged. Sensitive green belt reviews may be needed – and are being encouraged by Government guidance. New thinking on residential and other uses for town centres will be needed – and align well with structural change in the retail sector. • We suggest that if West London is to get involved in funding or influencing superfast broadband provision, it will need a carefully thought through programme which provides a clear set of benefits which would not be delivered anyway through market provision. • A continuing focus will be needed on creating great living environments. These attract and retain skilled workers – and there is good evidence that investment follows skilled labour markets, creating a positive economic impact as well as quality of life benefit.

Peter Brett Associates LLP 68 Inclusive growth

Peter Brett Associates LLP What this section is about, and why it is important

• From a purely economic perspective, deprivation reflects economic inefficiency: deprivation is caused by, and causes, an inefficient utilisation of productive resources in an economy. If factors associated with deprivation, unemployment or under-employment of labour could be addressed, then the overall productive capacity of the economy would be higher, resulting in increased economic welfare for all. National, regional or sub-regional differentials in GVA per resident capita will be a function of variations in: • Productivity: the output each worker produces; and • Employment: the number of people who are working, depending in turn on: 1. demographics (the working-age population); 2. labour market participation rates; and 3. unemployment rates. • Here we investigate the second and third of those sub-bullets – on labour market participation rates and unemployment rates. We also look at some of the proxy measures for social cohesion.

Peter Brett Associates LLP 70 Reducing social exclusion and building community cohesion can increase prosperity

• Social cohesion is a partial determinant of economic growth. For example, a level of trust in other people is essential for economic success in large, complex and interdependent society. Trust represents a valuable efficiency gain. Fukuyama believes that “the economic function of social capital is to reduce the transaction costs associated with formal coordination mechanisms like contracts, hierarchies, bureaucratic rules, and the like. It is of course possible to achieve coordinated action among a group of people possessing no social capital, but this would presumably entail additional transaction costs of monitoring, negotiating, litigating, and enforcing formal agreements.” This observation is borne out in practice. Trust is strongly correlated to growth. Empirical research has shown that “trust and civic co-operation are associated with stronger economic performance”. • Some commentators argue that social cohesion is a pre-requisite for the institutions required to create a more equal society. Cohesion matters to equality, given that some form of shared purpose sits beneath the concept of mutual obligations which lie behind a good society and the welfare state. Goodhart, for example, has suggested that falling levels of social cohesion could, over time, generate pressure for a more American approach - where an atomised, highly individualistic society has a much weaker sense of shared obligations. • Personal well-being, people’s thoughts and feelings about their own quality of life, is an important aspect of national and local well-being. Personal well-being estimates are based on data from the Annual Population Survey (APS) which includes responses from around 165,000 people. • West London outperforms all other London sub-regions on this measure. West London may decide that there is a continued role for investment in community cohesion, and shared community events, as well as more targeted interventions aimed at deprived individuals. These interventions may make West London a better – and more prosperous - place to live. The fostering of a civic pride and identity may also have positive economic results.

Average Life Low 0-4 reported score Satisfaction Worthwhile Happiness Anxiety Medium 5-6 West London 7.54 7.74 7.43 2.87 High 7-8 Central London 7.44 7.63 7.33 3.20 North & East London 7.48 7.71 7.33 2.97 Very High 9-10 South London 7.56 7.84 7.46 3.10 London 7.50 7.73 7.38 3.01 England 7.60 7.81 7.45 2.86 Peter Brett Associates LLP 71 The newly released Index of Multiple Deprivation (2015) shows the uneven spatial distribution of deprivation around West London

Peter Brett Associates LLP 72 The IMD is made up of different domains which show deprivation around West London in different dimensions 1. The Income domain follows similar spatial contours to the main IMD… 2…as does the Living Environment domain…

3…but the Health deprivation does, surprisingly, break out 4…as does the Crime dimension, which suggests that West of that spatial pattern in places… London is a relatively high crime area

Peter Brett Associates LLP 73 Although there are some pockets of severe deprivation in West London, relative deprivation appears to be falling compared to the rest of England. Blue areas in the map are becoming less deprived at a faster rate than the red areas • The IMD 2015 can be compared with older datasets to identify how areas are changing over time relative to other areas across England. However, it is not a direct measure of whether areas are “improving” or “closing the gap” against the average – so we need to be a little cautious about using to identify trajectories over time. The difference in 2010 and 2015 measures is down to how an area has fared compared to areas across England with similar levels of deprivation. • A local neighbourhood could well have improved in real-terms (eg lower levels of unemployment, higher incomes, higher skill levels, lower crime rates, better environment and so on), and may have improved faster than the average. However if other areas with similar levels of deprivation have done slightly better, the local neighbourhood will score as more deprived in 2015 than 2010. The message is that local authorities Source: Consumer Data Research Centre, UCL Dept of Geography. need to use direct measures Contains National Statistics & Ordnance Survey data © Crown copyright & database right 2014-5 alongside the IMD to understand how local areas are changing. 74 Peter Brett Associates LLP Unemployment is spatially concentrated – and maps back to the pockets of severe deprivation highlighted in the IMD 2015

Peter Brett Associates LLP 75 At the wider West London level, unemployment rates and long term unemployment rates are low: average rates are not far from being

at frictional (full employment) levels • Frictional unemployment is always present in the economy, resulting from temporary transitions made by ILO Unemployment Rate (June 2015) workers and employers or from workers and employers having inconsistent or incomplete information. Though estimates of frictional unemployment can vary, we are England & Wales 5.6% unlikely to see unemployment fall much below 4-5% London 6.6% when measured using the International Labour Organisation (ILO) measure, as used here. Anything North & East London 7.9% below the frictional rate identifies a tight labour market, leading to either higher wages to compete for labour – South London 5.5% possibly encouraging inactive working age residents Central London 6.4% back into the market – or disinvestment in the market. The former would be more preferable, however this West London 6.0% could be an risky end game to play. • The ILO measurement is to be preferred to the claimant 0.0% 2.0% 4.0% 6.0% 8.0% count statistics, because it measures people who are Source: Annual Population Survey looking for work, rather than those simply claiming benefits. It is also the official rate of and the Job Seekers - Previous and Sought Jobs 14,000 international standard measure for unemployment. However, it is unable to show the spread of 12,000 Sought occupation Usual occupation unemployment below local authority levels. 10,000 • As shown, those claiming unemployment benefit are 8,000 predominately looking for similar occupations they 6,000 previous have had. The biggest employment sector is 4,000 sales and customer services, which tends to be lower 2,000 value and therefore lower paid. These and other low 0 value activities may not help drive an economy up the value chain but they provide a significant number of entry level jobs, and essential support services to other businesses. These are particularly beneficial for the long-term unemployed and the less qualified. As such they can have wider social benefits through inclusion. Peter Brett Associates LLP Source: JSA 76 Unemployment is not falling as quickly in West London as elsewhere. However, West London is starting from a relatively low number, so improvements are likely to be more difficult to achieve

• With low rates of unemployment above the Change in unemployment, Aug 2011 to 2014 frictional rate, the challenges may be harder to reduce unemployment because North & West Central South East England & those out of work active residents may have London London London London London Wales greater problems in matching their skills to 0% the market.

-10% • Such problems will tend to relate to reflect a lack of basic employability skills like -20% communication and attitude and other -30% challenges such as debt, addiction and complex child care. The existence of these -40% problems tend to be more prevalent where there is a high proportion of long term -50% unemployed within a low unemployment -60% area. Some 43% of unemployed West Londoners have been unemployed for Unemployment over 12 months Unemployment over 6 months more than six months and a quarter for more than a year. 50%

• The West London Boroughs have co- 40% 44% 45% 43% 43% 43% designed whole neighbourhood 30% 37% interventions with partners and communities 28% to make local neighbourhoods more 28% 26% 26% 20% 25% successful with targeted employment and 21% skills advice. 10%

0% West London Central LondonSouth LondonNorth & East London London England & Wales

Peter Brett Associates LLP Source: APS 77 The overall unemployment rate masks particular problems in particular age cohorts. The “NEET” problems remains – with significant long term implications

% of total unemployed aged between 16 and 24 • Youth unemployment remains an issue which can create long term effects. The issue of NEETS (those Not in Employment, Education, or Training) remains England & Wales 16% important. Whilst the data suggests that this issue is not particularly acute in West London – at nearly half the national average - there is a risk that the issue is London 19% bigger than these statistics suggest. This is because the proportion of 16-18 year olds whose current North & East London 23% activity is not known is more than 50% above the England average of 9.0%. As a result, it is possible South London 15% that the number and proportion NEETs will be inaccurate.

Central London 16% • Continuing to address the problem of NEETS though intervention activities may be worthwhile to avoid longer term problems and impacts on resources in West London 19% addressing issues relating to exclusion like drug abuse and crime. The Audit Commission (2010) finds 0% 5% 10% 15% 20% 25% that “relatively inexpensive youth support projects can result in major public finance savings” – a NEET 16 - 18 year olds NEET, Nov'14 to Jan'15 individual is likely to incur public finance costs of £56k England 4.7% over a lifetime, and resource costs of £104k arising from un- and under-employment. London 3.4% • Some provision on this issue is already in place. West London’s Opportunities for Young People Programme North & East London 3.8% supports a key objective in the current Vision for Growth in West London. This is to support young South London 3.7% people (14-19) who have been identified as being at high risk of, not taking up employment, education or Central London 3.1% training post 16. The project also covers a group, many of whom are highly vulnerable, who have already become Not in Employment Education or West London 2.6% Training and therefore are likely to require subsequent 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% dependence on benefits. Peter Brett AssociatesNEETs as aLLP % of 16-18 year olds 78 Source: Annual Population Survey There appears to be an emerging problem with poverty in West London. West London contains two of the worst performing four boroughs in London

• The Trust for London document London’s Poverty Profile 2015 states that, for the Outer West & Northwest area, “this sub-region has always been in the middle of the rankings with a mixed performance across the indicators. But now the sub-region contains two of the worst performing four boroughs in London: Ealing and Brent”.

• The report continued that “these two boroughs in particular stand out for the high levels of low pay and unemployment.”

Peter Brett Associates LLP 79 Low pay is a problem in West London. Nearly half of jobs in one West London borough are paying less than the London Living Wage. Typically a quarter of residents are earning less than this

Gross Hourly Earnings, 2014 • This bar chart gives 10 percentile 20 percentile 25 percentile average hourly wages up to the median average £17.50 30 percentile 40 percentile Median range by percentile groupings for each West £16.50 London borough.

£15.50 • It shows that between £14.50 around 20% to 30% of West London residents £13.50 were earning less than the London Living Wage £12.50 (LLW), irrespective of £11.50 whether they work within West London, or outside. £10.50 London • Looking at the jobs £9.50 Living actually located in West Wage = £9.15 London, we find that £8.50 at 2014 around 20% to 30% in £7.50 West London are paying Minimum less than the LLW, and in £6.50 Wage = £6.50 in one borough this is nearly

2014 50% of jobs.

H&F H&F Brent

Brent

Ealing Ealing

Barnet Barnet Harrow

Harrow • However, there is a

Hounslow Hounslow Hillingdon Hillingdon strong variation between Residents Workers the boroughs.

Source: Annual Survey of Hours and Earnings Peter Brett Associates LLP 80 Wages in West London have fairly consistently stayed £30 per week lower than the London average, but around £80 higher than the national average. However, in recent years national wage level have started to slowly converge with West London wages £640

£620

£600 £593 £593 £587 £585 £580 £582

£560

£540

£520

£500 2010 2011 2012 2013 2014

West London (Resident earning) London (Resident earning) England and Wales (Resident earning)

Source: ASHE 2014

Peter Brett Associates LLP 81 There is a significant emerging problem with ‘in-work poverty’. The London Living Wage may be part of a solution, and West London could encourage take-up

• Back in 2012, in-work poverty was called “the most distinctive characteristic of poverty today. For the first time, it outstrips poverty in workless households.” • There is broad agreement that work is the most important route out of poverty, but more and more poor households in the capital include someone who is working. The Trust for London (2015) finds that number of low-paid jobs in London increased for the fifth consecutive year to 690,000 in 2014; a 13% increase on 2013. This means that 21% of people living in London are paid below the London Living Wage (or low-paid). • The Joseph Rowntree Foundation (2015) finds that “there is a lot riding on the labour market continuing to grow as strongly in the next five years as it did in the last five. But while the last five years was about getting people who were out of work into work, the next five has to be about helping people in work progress both in terms of hours and pay. This is potentially a much harder task.” (JRF (2015) Monitoring Poverty and Social Exclusion 2015 https://www.jrf.org.uk/mpse-2015/commentary) • The London Living Wage is a potentially important component of that effort. The London Living Wage (£9.20/hr) exceeds the national minimum wage of £7.20. The London Living Wage is voluntary; employers choose whether or not they pay it. It is independently set, based on the cost of living. • Lobbying exercises are under way to extend the London Living Wage. Campaigners point out that staff retention and productivity rise, making the Living Wage a potential win-win for both employers and employees.

Peter Brett Associates LLP 82 Are socially excluded residents of an area negatively affected by investment?

• There is a long-term debate in academic circles (Zuk et al, 2015) about whether attracting investment to an area simply brings in richer people from outside an area, bids housing prices up and so is always bad for existing residents - particularly the disadvantaged. This is a complex area, but particularly where investment is accompanied by protected social housing tenures for existing less advantaged residents, evidence suggests that investment that creates a more socially mixed area can improve the lives of all people, whether advantaged or disadvantaged. As we point out below, though, the situation is changing and will need to be kept under review. • Rising prosperity in an area has been shown to raise incomes for all types of people– not just skilled workers, but also for workers with lower skills. Moretti explains that this is for three reasons. Firstly, skilled and unskilled workers complement each other: an increase in the former raises the productivity of the latter. Second, a better- educated labour force facilitates the adoption of newer and better technologies by local employers. Third, an increase in the overall level of human capital generates externalities – in other words, when people interact, they learn from each other, and this process makes those who interact with better educated peers ultimately more productive. (Moretti (2012) • Area effects are reduced. Literature on ‘area effects’ suggests that to be poor in an area which houses lots of other poor people would generally be worse than being poor in a wealthy area. Whilst precise evidence of the existence of area effects (eg through longitudinal data) is elusive, it tends to be the case that levels of service are often lower in poorer areas; higher rated public services tend to be found in wealthy areas. There are a number of reasons advanced as to why this might be so (some suggest that middle class populations create pressure on service providers, so driving up standards). (Atkinson and Kintrea 2001). • However, the positive effects of attracting a more mixed demographic group to a disadvantaged area might only work effectively if rising prices do not force out existing disadvantaged residents. Until recently, secure social housing tenures and S106 agreements directed towards social housing tenures tended to help ensure that disadvantaged people could maintain a presence in an area subject to economic change. With recent changes through housing benefit reforms and the 2015 Housing Bill on Starter Homes, together with an increase in the number of less well off people in the private rented sector, means that we may see changes to the previous position. • West London may chose to keep the effects of these changes under review and design a specific policy response if the evidence suggests it is necessary.

Peter Brett Associates LLP 83 Key issues

• Deprivation can reflect an inefficient utilisation of productive resources in an economy, and social cohesion is a partial determinant of economic growth in large, complex and interdependent society. West London may decide that there is a continued role for investment in community cohesion, and shared community events, as well as more targeted interventions aimed at deprived individuals. The fostering of a civic pride and identity may also have positive economic results for West London.

• Research suggests that rising prosperity in an area has been shown to raise incomes for all types of people– not just skilled workers, but also for workers with lower skills. Rising prosperity in an area has been shown to raise incomes for all types of people– not just skilled workers, but also for workers with lower skills. However, recent changes to benefits and affordable housing provision and tenure might weaken these conclusions. West London may wish to keep the effects of these changes under review, and design a specific policy response if the evidence suggests it is necessary.

• The newly released Index of Multiple Deprivation (2015) shows the uneven spatial distribution of deprivation around West London. Although there are some pockets of severe deprivation in West London, relative deprivation appears to be falling compared to the rest of England. Unemployment rates and long term unemployment rates are low: average rates are not far from being at frictional (full employment) levels, but unemployment is not falling as quickly in West London as elsewhere. However, West London is starting from a relatively low number, so improvements are likely to be more difficult to achieve. The overall unemployment rate masks particular problems in particular age cohorts. The “NEET” problem remains. Although the problem is comparatively modest in West London, the large costs associated with NEETS justify intervention, even from a narrowly economic standpoint.

• There appears to be an emerging problem with poverty in West London. West London contains two of the worst performing four boroughs in London. There is a significant emerging problem with ‘in-work poverty’. The London Living Wage may be part of a solution, and West London could encourage take-up. Other interventions could also be developed.

Peter Brett Associates LLP 84 Working to catalyse change

Peter Brett Associates LLP What this section is about, and why it is important

• In this section we look at how West London may choose to approach some of the issues identified.

• This is not an action plan. Nor can we set priorities. This is the proper role of elected members and their officials. However, it is our role to help inform that the decision making process.

• It is important to understand the limits of what local authorities, either alone or together, can do – in order to focus on the areas where they do have most influence. Local authorities cannot do much, if anything, to affect the macro- economic environment, business regulation, and nationally controlled policy. In an age of austerity, they have very limited abilities to pay for direct intervention (eg real-world projects or programmes) in the economy. But evidence suggests that local authorities can be genuinely effective if they work carefully to catalyse change.

• There is evidence that many of these factors are already in place in West London.

Peter Brett Associates LLP 86 West London’s current position

• West London Alliance have set out a position on the strengthening of Economic Development in West London 2014-2015. It states that “The seven West London Boroughs which make up the West London Alliance have actively embraced a new approach to economic development and putting in place the right governance and partnership to facilitate inclusive growth. West London Leaders agreed a Vision for Growth and it was launched in November 2014 as a statement demonstrating their commitment to economic growth and the transformation of public services. West London is seeking to position itself effectively in order to take advantage of any devolution of resources and powers in various negotiations with Government and the outcomes of the Comprehensive Spending Review in November 2014 have led to the development of firmer proposals on how to make, for example, skills work at a sub- regional level. West London gained over £2m to implement its transformation of public services in the areas of employment, skills and providing opportunities for young people. They are extending and scaling out these programmes through EU and other funding. The West London Boroughs have developed new thinking with regard to a One Public Estate approach to co-locating services and freeing up development land , multi-Borough procurement of services, shared services and much closer working with key strategic partners , for example, Health , Employment and Housing partners combining to help residents into work. The West London Boroughs have embarked on large scale regeneration programmes such as Southall and Brent Cross using flexible methods of financing change and facilitating prosperity. The West London Leaders set up a new Joint Committee to promote and oversee economic and infrastructure growth in the sub-region – the West London Economic Prosperity Board. To ensure a larger scale and consistent stimulus to economic growth in the sub-region the West London Growth Directors commissioned this new economic assessment to inform the development of growth priorities for West London. Following adoption of priorities by the West London Economic Prosperity Board in February 2016 the Boroughs will be developing a Growth Action Plan with partners. The implementation of this action plan to promote inclusive growth will be overseen by the Board.”

Peter Brett Associates LLP 87 Adopting a clear strategy on intervention

• Longstanding Treasury advice provided under Governments of all complexions has provided a clear rationale for Government intervention. It has stated that “the rationale for government intervention, whether via a new or changed policy, a programme or a project … is essentially twofold: • The achievement of economic objectives by addressing inefficiencies in the operation of markets and institutions; and, • The achievement of an equity objective, such as local or regional regeneration.” • Basically, then, we can intervene in the free market on two grounds: to fix failing markets, or to correct the outcomes of markets when we think that they are damagingly unfair. • The underlying assumption is that markets are the best way of allocating resources. However, the Government acknowledges that markets do have problems in some instances. It is in these cases that government should intervene, but only if it can achieve a better allocation of resources. • Like any other intellectual framework, the concept of market failure must be understood and properly applied if it is to be of use. The concept can only be properly applied to questions of whether public sector intervention in the economy is justified. • Market failure is a concept that only applies when a market is failing to efficiently allocate resources due to some barrier to its operation. These barriers occur at the level of the market, be it the market for labour, skills, information, research and innovative technologies, environmental goods, transport and many others. (Market failure is not properly understood as being when the market does things that are unpopular. Markets might be working perfectly, and still produce unpopular results). • The framework suggests that Government intervention is also justified on equity grounds. The judgement of when inequality becomes unacceptably high rests with democratically elected politicians. • Market failure concepts say either nothing or very little about questions related to the geographical location of intervention. Market failures are not, generally, geographically bounded. Market failures can exist in both deprived places and wealthy places. Stakeholders may choose to address market failures in prosperous places or deprived places, depending on their strategic choices, and their approach to equity considerations. • Market failure concepts also say very little about the relative importance of different themes within an economic development strategy. Whilst evidence of market failure will be necessary in order to justify economic intervention within a particular thematic area (say, skills), it will say nothing about the relative importance of that theme in relation to other themes. • Market failure concepts apply to the rationale for intervention and the focus of policy intervention – but say little about how the resulting policies themselves should be designed or applied.

Peter Brett Associates LLP 88 High quality monitoring and evaluation can be used at policy design stage, and then through the lives of projects

• As the City Growth Commission observes, “Metros need to improve their capacity to collect and analyse data about the economy and public services, including the demand for and outcomes of such provision. Without robust, granular data, metros are limited in their ability to plan and commission effectively; aligned service budgets and an integrated reform agenda hinge on the power of timely, accurate information.” RSA City Growth Commission Unleashing Metro Growth (2014, 12)

• Nationally, it seems fair to say that regeneration interventions suffer from systemic confirmation bias. There can be an unwillingness to use good quality evaluation evidence to direct spending choices.

• Some failure can be expected, and risk of failure is an inherent part of innovation. Risk should be tolerated, but is not a badge of entrepreneurial courage or zeal. Policies should have risks minimised at design stage.

• Local authorities could develop a culture of experimentation, and be willing to innovate, but from a basis of good evidence. The What Works Centre for Local Economic Growth from the LSE is just one source of impact evaluation. The Centres’ reviews consider a specific type of evidence – impact evaluation – that seeks to understand the causal effect of policy interventions and to establish their cost-effectiveness, and produces a range of evidence reviews that will help local decision makers decide the broad policy areas on which to spend limited resources.

• If projects or interventions are failing, then management will need to ‘fail fast’ and respond quickly to either adjust delivery or terminate the intervention. More successful interventions can then be backed.

• Evaluation through the project life cycle will also highlight difficulties in any funded interventions.

Peter Brett Associates LLP 89 Planning and regulating flexibly and entrepreneurially

• West London’s authorities cannot do a great deal to avert structural shifts in the economy. These are macro-economic changes, and local authorities can do little to address them – even Growth if this was considered desirable. • The best mitigation is, perhaps, creating an innovative regulatory environment that will allow rapid adaptation to new sources of growth • It is likely to be important to stay in front of change. If West London can see change on the horizon, it is better to make the right adjustments early and in a controlled way, rather than wait until graver difficulties force change. • Charles Handy’s Sigmoid curve conceptually represents the things and the ways in which current circumstances have been arrived at. It has a base building/introduction phase; then growth; then a maturing phase, and finally a decline. It is the story of a product’s life cycle and of organisation’s (or individual’s) rise and decline. • The secret of constant growth is to start a new curve before the first one peters out. The right place to start is at point A – even when things are going well. Point A is when there is time, as well as the resources and the energy, to get the new curve through its initial explorations before the first curve begins to dip downwards. Often change only comes at point B, when it may be too late. • West London needs to get in front of change, and creating an innovative regulatory and skills environment will be one way to do this. We have provided a series of examples of how innovations might be needed throughout this paper.

Peter Brett Associates LLP 90 West London can plan and regulate entrepreneurially Does West London need to think innovatively and consider applying more radical ideas from elsewhere?

Self build in Holland to a set of broad design guidelines RSH+P modular housing scheme for the YMCA

Co-housing community Freiburg urban agriculture

91 Peter Brett Associates LLP 91 West London can lead and manage networks entrepreneurially

NESTA/Demos matrix on policy co-production • The level of change and innovation likely to be needed in West London policy over the coming period suggests that it needs to build its capacity to innovate. • New ideas will be needed. They very rarely arrive as a result of an individual or organisation operating alone. Instead, they most frequently arrive following communicating with others with different experiences and professional qualifications. Steven Johnson, for example, has claimed that the coffee shop is a common factor to a great number of eighteenth century financial and trade innovations: the social mix and quasi-business meeting space that the coffee shop provided created a crucible for new ideas. • West London needs a network to create a ‘collective intelligence’. NESTA: ‘In an age of “combinatorial” innovation – where major breakthroughs are likely to involve knowledge from different fields, and joint working between thinkers, doers and communicators - being good at collective intelligence will be a crucial determinant of success for businesses, for governments, and for countries. Understanding more about how collective intelligence happens, and devising and implementing effective tools for fostering it should be a major project for the UK in the next decade’. (NESTA 2013). • The network will need to include local Government, private businesses, utilities, academia, and consultancies in the creation of a “growth coalition” for West London. • We are suggesting a process of policy co-design, which builds in the ideas of a broad base of users from the very beginning of the planning process, and then involved in the evolving thinking as the plan is shaped. This should be distinguished from the usual plan design process where a draft (but relatively finalised) plan is Source: NESTA/Demos presented for public consultation. Excellent examples are already emerging in West London – for example, on infrastructure delivery at Old Oak and Park Royal. • This process of co-design can be seen as a somewhat less ambitious version of what is known as ‘co-production’, in which service users take responsibility for both design and delivery of policies (right). • The West London Alliance itself is an example of what needs to happen, and business to industry links will be needed at all levels in order to keep policy innovative and focused. Peter Brett Associates LLP 92 Building West London’s ability to pro-actively manage and deliver change

• Attempts are underway to create a cultural shift in Planning towards an emphasis on delivery. This is not a new aspiration. For example, the Killian Pretty review of 2008 sought to deliver a more “a positive and proactive approach to shaping, considering, determining and delivering development proposals.” Planning has become increasingly concerned with questions of 'how' development can be delivered, and 'when' - rather than just 'what’ development is desired and ‘where'. the implications of this change should not be underestimated. • This approach is already being adopted in West London (for example, at Brent Cross in Barnet or on Hounslow’s Golden Mile) and this best practice could be spread. Planners will need to • play an active role in enabling development and planning infrastructure, or research, or running applications more carefully to ensure that what is needed is provided when it is needed. • get an understanding of what investors need to see happen; and seek to understand, and then bring about, the right planning response. That means a more proactive approach, working alongside developers to ask questions like: how do we fix the barriers to positive change? What do we do next? When? Who is responsible? What is the right planning role? The right response might be to “do nothing” – but that needs to be a positive choice. • understand how to solve real-life issues on the critical path. Management intervention and funding could be focused on these issues.

Peter Brett Associates LLP 93 Brigading the funding

• There is a need to better understand available funding opportunities to support growth in West London. This may be done more efficiently on a sub-regional basis, particularly with regard to EU funding. • Government is putting in place a number of initiatives to assist with stimulating economic growth and localising funding for this, including through local government. What is emerging are different policy and funding initiatives, with some potential for bringing funding from more than one initiative together, to create a larger financial pot and impact. However this places a considerable requirement on local authorities to keep abreast of changing funding environments and adapt to new financing opportunities including what may become more localised. • West London may need to identify the opportunities for public private partnerships and investment funding to support capital investments in infrastructure to underpin economic growth, and make recommendations on likely viable investment models. Key issues are to: • review existing external funding sources and their future ongoing potential; and review internal borrowing/investment potential; to identify what monies could be used/pooled in support of investment; • review the scale of tax increments/business rates that might arise from developments and could support investment repayments; • explore alternative investment and funding models including public private partnership models, Pension Infrastructure Platforms and Municipal Bonds; • make recommendations to the West London Economic Prosperity Board on the models that best fit with West London’s financial resources and Vision in co-operation with other local authorities; and in relation to short, medium and long term financing of infrastructure; • identify key risk factors and next steps needed to progress recommendations • Such a study would require the full co-operation and participation of the West London Authorities’ finance departments and should have a cross Borough steering group. Critically, this will go beyond an understanding of public sector grant funding, and incorporate a better view of private sector funding opportunities.

Peter Brett Associates LLP 94 Key issues

• Our work suggests that West London will need to

1. Develop – or simply adopt - a clear framework to understanding how a Local Government sub-region can intervene effectively, and apply it rigorously. This requires having a very clear idea about the market failures that an intervention is really addressing, and how it is expected to achieve its outcomes.

2. Use high quality monitoring and evaluation at policy design stage to maximise chances of success, and quickly adjust or terminate failing initiatives. Some risk of failure accompanies risk – but when initiatives do fail, then management needs to respond quickly.

3. Plan and regulate entrepreneurially to get in front of change: West London’s Local Authorities need to get the regulations they do control – particularly Planning – to be genuinely innovative and proactive.

4. Lead and manage governance networks entrepreneurially: Governance networks matter to growth, improving competitiveness is “a collaborative process involving multiple levels of government, companies [and] educational institutions…a large number of factors impact on competitiveness and hence only a broad coalition can hope to improve [it].” (Porter) The network will need to include local Government, private businesses, utilities, academia, and consultancies in the creation of a “growth coalition” for West London.

5. Building West London’s ability to proactively deliver change – through a relentless focus on outcomes.

6. Understand how to best brigade the funding – providing a real sub-regional lead to promote sub-regional growth, possibly working to identify the opportunities for public private partnerships and investment funding to support capital investments in infrastructure to underpin economic growth. Critically, this will go beyond an understanding of public sector grant funding, and incorporate a better view of private sector funding opportunities.

Peter Brett Associates LLP 95 Issues to address

Peter Brett Associates LLP Important issues to address (1)

• This is intended to be an economic strategy or an action plan. Setting priorities is properly left to elected members and their representatives. We do not offer any order of priority here. Other interventions not listed here may need to be considered, and scoping exercises will be needed to ensure that interventions are deliverable. But our analysis of the West London’s economic context suggests the following: • People and skills: West London could 1. Design, prioritise and map skills interventions. 2. Spread the practice of the very best schools across the sub-region. 3. Develop a significant role in skills provision. Getting lifelong learning and FE provision right is a potentially major win for West London, and is likely to have highly beneficial effects over the long term on both growth and social inclusion. 4. Leverage diversity. Develop interventions designed to further internationalise its small business economy. (Note that any interventions would be hard to design – and such projects would need to be approached with caution, if value to the public purse was to be delivered). • Enterprise: West London could 1. Sponsor interventions on neighbourhood or town centre co-working spaces aimed at micro-businesses and the self- employed. These could be used to re-engineer high streets uses in a time of structural economic change in the retail sector. 2. Promote planning policy flexibility: emerging work we are aware of in West London suggests that West London authorities may need a flexible approach to planning policy in order to accommodate growth in knowledge-based jobs. It may be necessary to follow market signals in allowing these jobs to locate in out-of-centre office parks, rather than within town centres as stipulated by current policy. Policy change may be needed. 3. Sponsor research – possibly through GLA Economics – on the implications of future disruptive changes arising from automation, and possible responses. 4. Note that any business support schemes need to be approached with care in order to obtain good value.

Peter Brett Associates LLP 97 Important issues to address (2)

• Places, housing and infrastructure: West London could 1. Continue to push hard on production of Opportunity Area Planning Frameworks and Development Infrastructure Funding Studies. 2. Help to sponsor the hard choices needed around innovations on denser development in existing suburban areas, sensitive green belt reviews, and new thinking on residential and other uses for town centres. 3. Continue a focus on creating great living environments for both social and economic benefits. 4. Note that if West London is to get involved in funding or influencing superfast broadband provision, it will need a carefully thought through programme which provides a clear set of benefits which would not be delivered anyway through market provision. • Inclusive growth: West London could 1. Promote interventions on community cohesion, and shared community events, as well as more targeted interventions aimed at deprived individuals. 2. Monitor the effects of recent changes to benefits and affordable housing provision and tenure in order to ensure that all groups continue to see the benefits of growth and change. 3. Continue intervention on the “NEET” problem. 4. Encourage take-up of the London Living Wage. Other anti-poverty interventions could also be developed. • Working to catalyse change: West London could 1. Develop – or simply adopt - a clear framework to understanding how a Local Government sub-region can intervene effectively, and apply it rigorously. 2. Use high quality monitoring and evaluation at policy design stage to maximise chances of success, and quickly adjust or terminate failing initiatives. 3. Promote entrepreneurial regulation to get in front of change 4. Create, and manage governance networks entrepreneurially. West London could create a “growth coalition” for the sub- region including local Government, private businesses, utilities, academia, and consultancies. 5. Building West London’s ability to proactively deliver change – through a relentless focus on outcomes. 6. Brigade the funding – providing a real sub-regional lead to promote sub-regional growth, possibly working to identify the opportunities for public private partnerships and investment funding to support capital investments in infrastructure to underpin economic growth.

Peter Brett Associates LLP 98 Selected sources

Peter Brett Associates LLP A cross-country investigation Quarterly Journal of Economics 112: 1251-88 quoted Coyle (2007) The Soulful Science 219 Audit Commission, 2010 Against the odds: re-engaging young people in education, employment or training quoted Auditor General for Wales (2014) Young people not in education, employment or training https://www.audit.wales/system/files/publications/NEETs_Report_National_version_2014_English.pdf Burchardt, T., Le Grand, J. and Piachaud, D. (1998) ‘Social Exclusion in Britain 1991–1995’, Social Policy & Administration, 33, 3, 227–44 quoted ODPM – SEU (2004) The drivers of social exclusion - Review of the literature for the Social Exclusion Carl Benedikt Frey and Michael Osborne (2013) ‘The Future of Employment: How Susceptible Are Jobs to Computerisation? Carlota Perez Technological Revolutions and Financial Capital. Centre for London, CBFT 2014 David Goodhart’s paper http://www.pm.gov.uk/output/Page10554.asp . 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